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Regulator secures first criminal conviction for boiler room fraud
by Alex Steger on Jun 14, 2011 at 09:54
A boiler room fraudster has been sentenced to two years in prison and disquailified from being a director for two years.
David Roger Griffiths Mason pleaded guilty to 13 counts of carrying on a regulated activity without authorisation; one count of making false or misleading statements, promises or forecasts; and three counts of money laundering.
The conviction was secured by the Financial Services Authority (FSA) which has also fined approved person David Sinclair of Axiom Capital Limited (Axiom) £68,000 and prohibited him from holding any significant influence function (SIF) in the future, in a related regulatory action.
Sinclair unwittingly allowed Mason to use a bank account under his control to dissipate investor money to Mason and boiler room fraudsters. The FSA took no regulatory action against Axiom.
Mason co-ordinated cold-calling and the sale of shares in EduVest Plc, between November 2008 and May 2009. In total 32 people invested £270,000 in the belief that EduVest would be listing on the PLUS stock exchange in the near future but share certificates were never issued, EduVest never listed on the PLUS market and investors’ funds were never used for EduVest business.
In 2008, Sinclair was approached by Mason who asked him to help set up investment vehicle EduVest. According to the FSA EduVest ‘had no real function and appeared to have been used purely for the purposes of a share fraud.’
The regulator said Sinclair ‘effectively allowed Mason to use a bank account under his control to transfer investors’ money to Mason and associated boiler room fraudsters.’
Sinclair fully co-operated with the FSA and as he settled his case at an early stage he qualified for a 20% discount. Without this his penalty would have been £85,000. Axiom, financed by Sinclair, has voluntarily paid for all known investor losses and interest.
Tracey McDermott, acting director of enforcement and financial crime at the FSA said:
‘This sentence sends a clear message that the court takes boiler room offences seriously and will hand down significant sentences to those involved in them. We will continue to crack down on all types of unauthorised business, such as boiler rooms, and seek the severest penalties where possible.’
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7 comments so far. Why not have your say?
Sharon Sutton
Jun 14, 2011 at 10:07
great news. Unfortunately most of these fraudsters operate from places where the FSA are unable to touch them.
report thisAnitaki
Jun 14, 2011 at 10:25
Too little, too late.
report thisPat Riot
Jun 14, 2011 at 10:27
So who on earth invested £270,000 in this non-venture?
report thisJulian Stevens
Jun 14, 2011 at 10:51
Why on earth would anyone invest in a company they can't ever have heard of on the strength of a cold call out of the blue from somebody they'd never heard of who worked for a brokerage they'd probably never heard of either? The adage that a fool and his money are easily parted seems to be alive and well.
report thisNeil Liversidge
Jun 14, 2011 at 11:04
Sadly it's the old and wealthy who get conned. A friend of mine works for a major city private client manager. An elderly client of his sunk £70k on the strength of phone calls from a boiler room. The elderly tend to be more deferential and polite and scum like these play on that. I school my clients to tell them to **** off when they call and/or blow a whistle down the phone before hanging up. At least that way they get the message that the client isn't a soft touch and they needn't call again. We've all got an edcation job to do to protect our clients from people like this. We address it regularly in newsletters to make clients aware.
report thisCompliance Officer
Jun 14, 2011 at 11:11
I thought that Julian until I read some of the detail of what these people (not these specific people) actually do. As quoted in a previous FSA disciplinary case about approving marketing material one taped call included the threat to come and gang rape an elederly widow if she didn't "invest".
report thisAndrew Baker
Jun 14, 2011 at 11:13
So Mason serves one year (50% off, special and permanent offer!) and cannot be a director for two years: why two years? Why not forever. Do we assume that after two years, he'll be an honest man?
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