The brokers of the boiler room actually "create" a market by attracting buyers, whose demand for the stock drives up the price; this gives the owners of the company enough volume to sell their shares at a profit, a form of pump and dump operation where the original investors profit at the expense of the investors taken in by the boiler room operation.
The International Journal of Law, Crime and Justice states that:[3] There is a fairly strict division of labour within the boiler room.
Next are the ‘verifiers’ or ‘openers’ who call customers to make them more interested in the investment and their firm, win the confidence of the victim and sell them, perhaps initially, a small amount of shares.The term might have originated [citation needed] from the cheap, hastily arranged office space used by such firms, often just a few desks in the basement or utility room of an existing office building, with the "heat" and "pressure" of close quarters, and fast-paced sales tactics analogous to the conditions in a boiler and, in the former case, its surrounding room.
[citation needed] In 1968, Senator Robert F. Kennedy had six women working for him as the "Boiler Room Girls", as they were known, and whose fame grew as a result of the death of Mary Jo Kopechne in 1969.
These boiler rooms were located primarily in the southeastern United States, most notably Memphis, Tennessee and later Little Rock, Arkansas.
For example, many boiler rooms contacting prospective investors in the United Kingdom operate from Spanish cities such as Barcelona and Valencia.
[12] Operators of the scams buy old shelf companies with no complaint history to give the appearance they've been trading legitimately for long periods.
[15] In late 2014 it was announced Queensland's Crime and Corruption Commission had taken over investigation of several Gold Coast boiler room scams due to allegations fraudsters were receiving police protection.
Season two of the HBO show The Sopranos depicts a pump and dump scheme being operated out of a boiler room by associates of the fictional DiMeo crime family.
The 2013 film The Wolf of Wall Street, starring Leonardo DiCaprio, also involves a boiler-room investment business and is based on the memoir of convicted penny stock fraudster Jordan Belfort, whose Stratton Oakmont brokerage house operated as a boiler room.
A 2010 episode of the television series White Collar depicted fictional conman Neal Caffrey infiltrating a group of corrupt brokers also peddling inflated penny stocks.
Impacts of fraudulent boiler room business range from financial loss to decline in mental health and stability.