The Financial Services and Markets Authority (FSMA) issued a warning on Wednesday, telling the public to beware of fraud in the diamond investment industry. The companies involved in the misconduct are allegedly offering investments in diamonds through several avenues, including websites, email, and phone.
The general pattern of such schemes includes telling clients that the purchase of diamonds is a good investment and that it will yield better returns than they would otherwise receive from their respective banks. However, the truth behind the information is far more bleak than potential clients are being told. The complaints received by the FSMA have a recurring pattern.
The most alarming complaint received was that after successfully convincing clients to purchase diamonds, the companies would no longer contact them and became unreachable. One victim writes: “I invested in diamonds with a company named XXX. Since last week, I have found it impossible to contact them by phone (…) at the usual number. I also tried to contact their offices in Brussels. The telephone number is that of a cleaning company (…), which of course has nothing to do with an investment firm.”
Why Ethereum Needs Layer 2 Solutions More Than EverGo to article >>
Another complaint described clients not being able to sell purchased diamonds, reducing their liquidity substantially. Others who say they were able to make a “sale”, later found that they could not successfully receive the funds from the transaction.
Some investors who did in fact receive their purchased diamonds came to realize that the actual value of the rocks they received was far lower than the price they had paid these companies. One victim of this fraud said: “… I received the diamond [although it had always been agreed that it would be kept in a safe]. I sought the advice of a trustworthy jeweler. He told me that the diamond was worth much less than what I had paid, only half as much, or less.”
Avoid Becoming Victim of (Diamond) Fraud
As a preventative measure against fraudulent activity, the FSMA has laid out guidelines for the benefit of the public. It is best for everyone to familiarize themselves with these important warning signs, in order to know how to detect and avoid potentially unlawful and financially detrimental activity.
The main signs for alarm include promises of irrationally high returns, receiving unsolicited phone calls and emails, and the inability to verify critical company information. Moreover, the public should attempt to confirm the track record of the company, and question any information they receive from representatives.
The FSMA has been active in protecting public interests as of late. Last month, Belgium’s financial regulatory body issued warnings against three boiler rooms, which offered investment opportunities without complying with regulations.