Boiler room frauds are simple salesman tactics to trick investors into spending money on stocks which are either not worth it, or are owned by people who the salesman know, the latter scam is expecting the investors to buy the stocks at a higher price, after which they won’t be able to sell to anybody else, since, the stocks are not wanted by other investors.
The term boiler room originated from the earliest known fraud of this type. The scheme was running inside the boiler room of one of the scammer’s house, combined with the salesman pressuring the investors into buying something that is not wanted, just like the boiler gaining pressure inside when charging.
Prevention
Easiest form of prevention and not getting scammed is to really think about what the person on the other side of the line is presenting to you. The scheme heavily relies on cold-calling, that is, when the caller does not really know the potential victim, which victims are often gathered from a list of phone numbers, know as sucker lists. So if you don’t know the person who is calling, and he is trying to give you a “secret” which will change your life if you spend a little money on, then you should know that is a scammer.
