FSA to return cash in share fraud scam

LONDON (Reuters) - Victims of a share fraud scam in Britain will be handed back 270,000 pounds by the Financial Services Authority as part of an investigation into how cold-calls from overseas persuaded citizens to invest in worthless shares.

The FSA, whose investigation centres on two individuals and seven businesses suspected of involvement in the "boiler room" share fraud, said on Tuesday it believed this was the full amount invested by victims.

In a type of scam the FSA has estimated could cost 300 million pounds per year, members of the public were telephoned by people saying they worked for brokers Rothman Capital, Bishop Capital, Bernam Shore and Investor Relations Corp and encouraged to buy stock in a company called Eduvest Plc, the FSA said.

Having been promised a significant return on their investment, around 32 people paid cash into a UK bank account number.

Margaret Cole, the FSA's director of enforcement and financial crime, said it was rare for victims who deal with unauthorised firms to recover cash "as the money usually disappears without a trace."

The regulator and police raided three premises, arrested one person, served injunctions, froze assets and restrained unauthorised activities last November. But noone has been charged and the case continues.

The FSA has said about 3,000 victims contact the regulator each year after losing on average 20,000 pounds each, which would price this type of fraud at 60 million pounds. But the FSA estimates that much remains unreported and that the real figure is more likely to be between 150 million to 300 million pounds.

(Reporting by Kirstin Ridley; Editing by Jon Loades-Carter)