A FINANCIAL fraudster selling dud shares to unsuspecting pensioners in Kyrenia may be about to move onto larger and more lucrative markets in the south, a source in the north revealed yesterday.
The fraudulent schemes, known to experienced investors as “boiler-room scams”, involves selling online, over-the-counter (OTC) shares in small hi-tech companies that dealers know will collapse in a short period of time, leaving investors penniless.
The allegations centre around Falcon Capital, an investment company based in Beirut that, according to the source, has around 20 hi-tech companies in its portfolio – all of which are bankrupt or close to collapse.
The source said he first became suspicious when friends told him of investments they had made having been promised they would double their money in months.
“When I hear things that are too good to be true, I get suspicious. I decided to check out the companies in Falcon’s portfolio and found they all showed the same pattern – a burst of share-price rises followed by a gradual tricking away to nothing”.
“What they do is tell you shares in particular company will be on the market soon, but that they can offer you cut-price shares at pre-launch prices. Once the shares are sold the buyer has to wait up to three months for share certificates to arrive.
“By the time they receive them the price may have indeed risen, but will also have fallen again to below the sale price,” the source said.
He added that the price only remained close to the original sales price because those operating the scam retained enough shares to trade between themselves, thereby giving the impression that the company was operative.
“But after a year or so they stop trading completely, allowing the share price to drop away to nothing”.
The source believes Falcon have at least one agent operating in the north.
“There is man I know of operating in Kyrenia who has sold shares to between 10 and fifteen people I know. None of them can sell their shares on without losing everything,” the source told the Cyprus Mail.
“He is very well-known to ex-pats in the Kyrenia area and uses his social connections to find new customers,” the source added.
“He is very big in restaurants, cocktail parties and cultural events,” he said.
“The sort of people he is preying on are those who have just come into a lump sum, either through the death of a spouse or a pension fund coming through. The sad thing is that these kinds of people do not see that kind of money again”.
The source believes that the agent in the north may have “exhausted the seam” and will soon be moving into the south to exploit a yet larger pool of expat wealth.
“I know this man is working on establishing links with cultural groups in the south that will provide him with a new source of rich pickings”.
Cyprus International Financial Services Association (CIFSA) director Ian Brooks told the Cyprus Mail yesterday he had received information of Falcon’s activities in the north and that the company was currently looking into its activities in Cyprus.
“The problem is that people should be working with properly licensed, registered brokers,” he said, adding that those operating in Cyprus without proper licences were doing so “outside the law”.
“To be involved in selling shares you have to be licensed in the country you come from, if is an EU country, or here”.
Another CIFSA director Jeremy Shearman warned potential investors to keep one thing in mind if offered share purchases that would produce miraculous results in a short period of time.
“Let’s face it, if the prospects were that good, the person selling them wouldn’t be offering them to you – he would be going all out to raise capital to buy them himself and them retire to the Bahamas”.
Shearman added that CIFSA had been in touch with Falcon Capital offering to carry out necessary procedures for registration and licensing, but had received no response.
n CIFSA encourages anybody who has any concerns over shares purchased from Falcon Capital to contact them on 22-496179
