Recovery Room Schemes

by Natalie MacLellan on September 30, 2009

in Fraud Prevention, In the News

As if being victimized by investment fraud once was not enough, 37 per cent of Canadian fraud victims have been victimized more than once.

This is not always a random event. Many scammers specifically re-target past victims, or share information so others can later target their victims. These scams are referred to as re-loading or recovery room scams.

Recovery room schemes involve companies that contact investors who may have lost money in a fraudulent or illiquid investment with an offer to buy their shares at an inflated price. Once the investor agrees to sell their shares a contract is drawn up and they are asked to pay a fee to cover business costs, often directed to wire a sum of money to an offshore bank account. The scammers take the money from this offshore account but do not repurchase the shares and the victim for a second time loses money.

The Alberta, Manitoba and British Columbia Securities Commissions have recently issued investor alerts regarding such schemes, and Saskatchewan Financial Services Commission issued a temporary Cease Trade Order, all of which can be found here:

Manitoba Securities Commission Alert September 24
British Columbia Securities Commission Alert September 24
Saskatchewan Financial Services Commission September 25
Alberta Securities Commission Alert September 29

The Nova Scotia Securities Commission reminds investors contacted with such offers to immediately notify your local securities regulator and ask to speak to an investigator. Other companies may be attempting to carry out the same offer. As always, be very cautious before making any investment.

This post featured in the Best of Money Carnival 19 on October 5, 2009 – One of the top 10 money posts of the week.

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