Search by

Owen Caterer

Should I buy stock over the phone?

Posted on February 6, 2013 Facebooktwittergoogle_pluspinterestlinkedinrss

Last week we had another potential client walk in the door who had physical share certificates.  He was trying to sell some shares for a company listed on the NASDAQ.   He said his broker couldn’t help him and had since disappeared and was hoping we could help him.


I have to confess, I hate these conversations although I’ve had to have a few over the years.

Our friend had been scammed and had most of his money taken, despite having some beautiful share certificates and a “broker” in Singapore.

Here is how it happened…

The call

Leo* was working away in his job as a quantity surveyor, when he received a phone call.  Not another financial adviser!  But Mike Glass was slightly different.  He didn’t try to sell a meeting for financial advice.  He introduced himself as a stock-broker based in Tokyo Japan.  He researched stocks on the Nasdaq to build his client base and was good at uncovering diamonds in the rough, he claimed.

Not Convinced

Leo didn’t believe it for one second.   So Mike passed his tip on anyway.

“I’m good at what I do.  Allrocket Co has just signed a deal with Staples and they are probably going to rise 30-50% over the next week.  I know you don’t believe me, so just watch the stock and you’ll see.  Put ROCKE2 into your watch list and stay tuned.  You’ll see I’m right.”

The stock rose 65% in fact.  Mike was right somehow.

“Next time you should believe!  Next time I call, you need to listen OK?”

Leo wasn’t convinced at all.  It all seemed very weird.

Another Tip

A few weeks later another tip.  This time it was up 71% in a week.  Leo still didn’t act.  Still 71% was a very nice return.  Imagine if he had put $30,000 USD in savings for 71%!  What about both?   He was now curious and even visited the website of the stock-broker.  It looked pretty standard.  The company seemed based in a decent part of Tokyo from what he could remember visiting a few years back.

The Push to Sale

A few weeks later Mike called back again.  He challenged him “I’ve been right twice now and how many gains have you missed?  Are you a man or do you let your wife cut your lunch and hold back your dreams?  Are you man enough to make a decision!?”   Leo decided to act.

The Money Goes

Leo decided to act and got Mike to send through the application form.  He sent it in with his passport, application form and sent $10,000 of his money to the brokerage account in Singapore.  Little did he know that was the last he saw of his money.

The Broker disappears with the money

A few weeks later the mail arrives.  Leo is thrilled.  His shares are up 55% and he wants to take profits.  The broker then stalls, pushing for further investments (see follow-on cons below).  Let’s assume Leo has no more money however and is frustrated.  He asks him to sell his shares now.  Frustrated he sends demanding emails, but there is no response to emails or phone calls.  Finally he asks an old mate in Tokyo to visit the office and ask questions in person.  But the office mentioned has a Japanese advertising agency that has never heard of Mike Glass.  Of course Mike Glass wasn’t his real name and probably never worked there.

So what happened?

Basically this is a pink sheet scam.  Also called a pump and dump and is old as the hills.  In fact this scam was one of the reasons the SEC was originally invented, way back when.  Here are links on US Today or Wikipedia’s explanation of “pump and dump” which is the same trick.  Or just google Pink sheet and see what comes up.

The company isn’t actually listed on the Nasdaq.  Pink sheets or OTCBB (Over the counter bulletin board) are actually not a true listing yet are still part of Nasdaq’s information services.  The companies don’t file returns with the SEC and the stock prices reported are purely what the company reports to Nasdaq.  The perfect vehicle for a scam then.

The exact mechanics

The con artists set up a holding company in the US or buy a pink sheet listing by reverse takeover.  They build a website for the fake company and then contact NASDAQ.   It isn’t expensive and many scammers probably have several they manipulate to enable the multiple call backs that Leo got.  More on that later.

So, are all Pink Sheets and OTCBB companies a scam?

Not all, but probably most.  Our guess is 80-90%.  Still for the average investor, it is worth stearing clear all together.  Unless you are in the unlikely scenario where a close family member works there and you know it is real.  Even then, you still have a risk that the company doesn’t go well, so it is still very risky.

Why don’t the authorities do something?

They won’t help you in Asia usually.  The call comes from somewhere else.  Another country.  What can they do?  It probably didn’t actually come from Japan, maybe Thailand, India or anywhere in Asia.  Cross border collaboration on big frauds (like Sinoforest for example) is close to impossible.  On small cases the authorities aren’t even interested.  What responsibility does the Thai authorities have for you here in China?  None!

Can I do anything?

In Asia only Singapore’s MAS and Australia’s ASIC make a serious effort at consumer fraud protection.   Australia has a decent scam watch list here.  If you get scammed, reporting it to Singapore and Australia are your only avenues.  Also report it to the bank where you sent your money. Don’t raise your expectations high though.  You are just paying it forward.

Is there ANY way to get your money back?  I’m willing to try anything!

Nope.  Even if you found a hit-man (and I’m not suggesting that you do), you would have to track down the right person.  The name they used was 100% fake.  Only the bank account they gave for the transfer is the only useful clue and that might have been long closed or fraudulently opened.

Do the shares have any value?

Nope.  Normally too rough to even be used as toilet paper.


  • Only scammers sell shares over the phone by cold calling.
  • They can manipulate the price to produce any performance they chose, but it has no real value.
  • We have even heard of a pink sheet scammer who bothered to travel to Suzhou, IN PERSON, to sign the client up.  That is rare but a good warning.  Asking them to visit won’t weed them out.
  • Avoid pink sheets and OTCBB at all costs.
  • Only set up stock brokering accounts with a big famous broking company like e-Trade, Interactive Brokers, Morgan Stanley, TD Ameritrade etc.
  • A stock broker must be licensed by a financial authority in its home jurisdiction, so check out their licensing if you haven’t heard of them before.

So what happened to Leo in the end?

He did several deals after the first one was successful.   His last trade was a $50,000 USD purchase with him sinking in $130,000 USD in total.  That was a majority of his liquid retirement savings.   Leo is 63 and although he wants to retire, he has to earn that money back now.   Even though he has high blood pressure he can’t retire until one of his company’s pensions kick in a few years.  So much for relaxing in retirement from those share purchases.

He still hasn’t found the courage to tell his wife.

Follow on Cons and Variations

If  you still believe

  1. The single share upsell.  This company is going to do another deal.  You need to buy now!
  2. The next share.  I have another share for you!

If you want to sell

  1. I have a buger but he wants a BIG LOT.  I need you to buy another 5,000 shares since I have a buyer for 10,000 shares.  Then I can sell your shares.
  2. Unlock your shares.  These shares don’t have sale rights, but you can pay $5,000 to “unlock” them.

If you twig

  1. Class Action Lawsuit.  A few months after they disappear you get a call from a “lawyer” asking if you want to join the class action lawsuit against Mike Glass.    All you need to do is send $2,000 USD to join and fill in this form.  ALSO a scam.


The story is all too true.  Be careful and tell your friends.


*All names have been made up.




About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.

About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010.  He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area.   This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China.  Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model.   Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business.  Owen's interests are tennis, running and his wife and two children.  He speaks fluent Chinese, first arriving in China in 1997.
Tags: , , , , , , , , , , , , ,

Categorised in: ,

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>