Imagine the excitement – you're at home at night, feeding the kids, when suddenly the phone rings and someone asks you to be a part of Hollywood and invest in an independent film.
Sure, it costs a lot to buy-in – more than $30,000 in many cases – but the guy on the phone promises you up to a 1,000 percent return.
Sound too good to be true?
Apparently, it was.
The feds announced today that they've arrested a dozen people for apparently running a boiler room scam, promising astronomical returns in exchange for money to produce indie films. Nine people have been arrested in Southern California and three have been nabbed in Florida.
According to the U.S. Attorney's Office, the men solicited more than $25 million from hundreds of victims.
The scam apparently worked like this: telemarketers would cold-call potential investors from “lead lists” – much like the ones made famous in Glengarry Glen Ross – and made false claims, including that 93 percent of the money would go toward producing the film and that investors would see up 1,000 percent returns.
In fact, say the feds, more than a third of the money went into the telemarketers' pockets.
Many of the movies were never produced, however, one little gem, “From Mexico With Love” – which according to IMDb is about “A washed-up trainer takes a self-destructive young boxer under his wing,” – did make it to the screen.
The defendants took in about $15 million from 450 investors, but the movie apparently only cost $5 million to produce and generated around $550,000 after it was released. The rest of the money presumably went to the men in the boiler room.
All 12 of the men who have been arrested are charged with mail fraud, wire fraud and sale of unregistered securities.