Rare earth metals may sound precious, but for many investors they are just a costly scam, warn police.
Detectives are urging potentials investors to guard against crooks smooth talking the unwary out of millions.
Devon and Cornwall Police are investigating complaints from five investors who have fallen victim recently.
Victims are told rare earth metals are the ‘next big thing’ in alternative investments, and then persuade them to invest substantial sums in rare earth metal oxides.
The big selling point is that the metals are used to manufacture a wide range of consumer goods, from mobile phones to computers, and so demand for them is increasing all the time.
However, most prospective buyers do not understand that the term ‘rare earth metals’ does not mean they are rare – instead they are just more difficult to mine and refine.
In some countries, like Australia, they are common.
The issue is that the metals are used in minute quantities and industry buys them on an industrial scale – and won’t be interested in someone who has a kilo or two as an investment.
The rare earth metals market is not regulated, so no official organisation can help with compensation or look in to complaints when the metals do not arrive or are worthless.
Another issue is that such metals are traded privately, so it’s difficult to find any comparable market values, unlike metals like gold and copper.
“This scam is huge and just about anyone could become a victim to persistent fraudsters,” said a Devon and Cornwall Police spokesman.
“People should remember that genuine investment companies do not cold call about such investments and then use intimidating and persuasive tactics.
High pressure sales
“Those who are contacted should think very carefully about what is being offered and to not make investments on a whim. You should also make some basic checks about the company that is calling.
“There are bona fide companies who do deal legitimately in these investments, but this fraud is offering poor value or worthless commodities.”
The Financial Service Authority (FSA) confirmed it has yet to see anyone make money buying rare earth metals.
A spokesman said: “We are seeing these firms have previously been involved in promoting other unregulated and high risk products such as carbon credits, overseas land and whisky.
“They are using high pressure sales tactics and targeting vulnerable and novice investors – usually they are elderly.”
“We do not regulate the market for metals and these unscrupulous firms are sidestepping the rules but we do raise concerns with the government.”