Diamonds are not just any girl’s bestfriend – it is also a very attractive investment alternative. Annual return can range from 2.5% to 10%, depending on the color.
However, unlike gold and silver, or other investments where prices are reported on a stock market, diamonds are not traded on a public exchange but negotiated privately. This makes it harder to know the real value of the diamond, thus making it susceptible to abuse. The diamond trading industry is also unregulated – brokers are not required to be registered with a certain government authority.
A BBC news report recently warned older people who are the targets of this new form of investment scam on diamond trading. About 250 reports were received last year by the City of London Police.
One victim was an elderly man with Alzheimer’s. The fraudsters cold call the man offering high returns on rare diamonds. In three months, he invested more than £90,000. Another £85,000 was about to be transferred to the scammers when a family member of the man found out about it and realized that his father was being cheated.
The investigators revealed the strategy of the scammers. They target the vulnerable older citizens and disguise themselves as diamond brokers. The „broker“ makes a call and follows a script offering a mark up that is sometimes even as high as 17 times the actual value. These „agents“ also use technical jargon, impressive job titles and mock websites. To make the call more convincing, it would seem that the „broker“ is working in a busy call center environment.
Authorities said that one should be wary when the caller would ask you to „keep the investment a secret“, or „to change your surname so as to protect yourself“.
Last year, a brokerage company, Jubilee Diamonds Ltd, received some £2.3 million after 18 months of trading. The company used fake testimonials, asked its employees to change their names, and sold gems above their value.