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What “Boiler Room” teaches you about scams

Matthew Partridge looks at the lessons investors can learn from the film "Boiler Room".

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Boiler Room (2000) is a film starring Giovanni Ribisi and Vin Diesel (pictured), set inthe world of underground brokerages (also known as boiler rooms). To the distaste of his father, college dropout Seth (Ribisi) makes a living by running an illegal casino in his house. One of his customers persuades him to apply for a job at brokerage JT Marlin.

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Seth quickly learns the brokerage is a scam, selling penny stocks in dubious companies to investors using high-pressure sales techniques. Disillusioned, Seth tries to set up a scheme to destroy the brokerage, which backfires, leading tohis father and him facing arrest.

The key moment

Lessons for investors

Being scammed by a boiler room isn't the end of the pain for some victims, who are then approached by people posing as "asset recovery firms". The companies inform their victims that they have been cheated, but promise that they can recoup the losses incurred in return for an upfront fee. Naturally, once the money is paid over, neither the firm nor the cash are ever seen again.It should go without saying that you should avoid anyone who makes such an offer.

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