'Recovery Room' Scammers Targeting Creditors Amid Virus

By Lucia Osborne-Crowley
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Law360, London (June 11, 2020, 5:15 PM BST) -- Scammers are targeting creditors of a London property company and pretending they can return the money owed to them in exchange for a fee, the government warned on Thursday, as fraudsters across Britain take advantage of chaos created by the coronavirus.

The Insolvency Service warned that fraudsters are contacting consumers who lost out when Essex and London Properties Ltd., a property investment company accused of operating as a Ponzi scheme, was wound up by the courts in 2018. They falsely claim to be able to release the money the creditors are owed ⁠— a tactic known as recovery room scamming.

"Many investors have reported to us that they have received unsolicited correspondence from firms that claim they have funds to distribute to them," Joanna Caswell, deputy official receiver, said. "Not only are these letters false but they use scare tactics to frighten people into action."

The official receiver said it would "never contact anyone offering to recover their money for a fee or recommend another organization offering the same service." Consumers should never accept unsolicited calls from anyone claiming to be able to recover investments.

The official receiver said it has seen correspondence in which recovery room scammers attempt to take advantage of financial anxieties caused by the COVID-19 downturn. They push investors to recover their funds, urging them to avoid disappointment, or telling them that the recovered money is available on a first-come-first-served basis only.

Fraudsters have posed as staff from the Insolvency Service and produced fake bank statements to try to convince consumers they have the funds ready to distribute, the agency said.

Creditors are often pressured into sending the fraudsters money in order to secure the recovery of their funds. In one case, scammers directed a consumer to send £3,000 ($3,792) in an envelope to a residential address to unlock the money they were owed.

Essex and London Properties was shut down by a London court for conning consumers out of almost £19 million.

The company claimed it was snapping up real estate to sell on at a profit or rent out for investors. More than 800 people were duped into investing between £5,000 and more than £100,000 in property over 18 months.

The Insolvency Service said it is working with other government agencies to tackle financial crime connected to the COVID-19 pandemic. The Financial Conduct Authority has also warned of the potential for COVID-19 to encourage financial crime and urged investors to be wary.

--Editing by Alyssa Miller.

For a reprint of this article, please contact reprints@law360.com.

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