I am an EU resident being contacted about stock I own in a defunct company by a supposedly US based lawyer, is this a scam?

Question

I am based in the EU, so I have very little knowledge of how the US legal system works.

I have been contacted by a "law firm" in the US about a financial issue: a company in which I own a small amount of shares went bankrupt several years ago, and apparently they are in liquidation and being bought by another company. I had completely written off this investment until this law firm contacted me out of the blue a couple of days ago, and now I am hesitating since:

1. They are offering immediate payout
2. They are sending me a PSA (Payment Settlement Agreement And Mutual Releases) / PSPA (Private Stock Purchase And Escrow Agreement) for me to sign. I do not know what those are.
3. They are asking for a bank account for the payment.

This is the full email text (redacted for anonymity):

Please find attached the documents pertaining to the investment that you made in XXX Investment currently known as XXIT (XXX XXX Investment Trust) several years ago.

You, as all other shareholders, have the legal right to sell your position to our client, who is at this point in time the only buyer, he already has 51% control of of the common shares, however, it is his intention to acquire at least 75% of the outstanding shares to gain complete control over the assets of the company. The remaining 25% would be immediately absorbed by the new owner and have no financial value whatsoever to the existing shareholder. Under US law this is perfectly legal and a commonly used practice of acquiring full control through the purchase of a majority interest.

The company no longer trades on any stock market as it is in receivership. There is no administrative board to contact, and it doesn't even have a valid corporate ID any more, therefore research options are very limited,as you can imagine.

Upon receipt of your signed documentation, I will put you in the payout list. This is a first come first served situation ,so obviously time is of the essence.

Does this sound legitimate? The wording does, but I have been checking a bit online, and I am suspicious:

1. The website could be a simple stock template.
2. The whois of the website of the law firm refers to a registrar in Panama (edit: this seems due to WhoisGuard Protected). It has been registered very recently: Creation Date: 2017-11-13
3. I can not find the law firm in any registry - but I do not know where to look, to be honest.
4. The law firm is not to be found in Google Maps, nor in Google itself. It does appear in Bing though.
5. They are trying to get this done quickly.

So I tend to think that this is a scam, but I would like to understand how this is supposed to work.

1. In case I provide my bank account number (IBAN number in the EU), how will they be able to abuse this? I will simply cancel any suspecting charge in my account.
2. What are they trying to do with me signing the PSPA / PSA documents?

What other research could I perform to verify the authenticity of this? Any other advice?

Edit

Email signature:

Burke Corporate Law

800 N Glebe Rd, Arlington, VA 22203 United States Phone: 1 (571) 480 6959 www.burkecorporatelaw.com

Answer 1

A bit of detective work.

• The website lists no names for the firm. Any business, doctor, lawyer, etc, is at least going to tell you who the main partners are.
• The site itself looks like a generic framework with literally no content, just placeholders. A web designer's first pass for a client. But not a real site.
• The website for the building at that address doesn't list them as a tenant.
• Calling the phone number for the law firm gets a generic leave a message recording. Doesn't even mention firm name.
• A Whois search on the domain name shows the contact info is hidden, thru a Panama address.

Any one of these is cause for concern (did someone erase the correct outgoing voice mail greeting? Did the web guy choose "private?"), but the combination of all 5? Scam.

Answer 2

Purely FWIW, "Does this sound legitimate?"

The company no longer trades on any stock market as it is in receivership. There is no administrative board to contact, and it doesn't even have a valid corporate ID any more, therefore research options are very limited,as you can imagine.

Upon receipt of your signed documentation, I will put you in the payout list. This is a first come first served situation ,so obviously time is of the essence.

No, it's just an everyday internet scam of some sort.

It sounds like a foreign speaker pasted it together from found phrases, "trying to sound important." The concepts mentioned in the emails (the "25% !" etc) are completely nonsensical.

What other research could I perform to verify the authenticity of this?

1. Just phone them. Couldn't be easier. Street-view the building and phone at different times to check they are a real business with secretaries, etc.

2. The key is this - web sites of legal practices big and small absolutely always list all the partners and major staff. Then, each of those people will have a very strong profile in the information sphere, ranging from huge numbers of local (or bigger) news articles to endless academic mentions, legal mentions, etc. - it's the very nature of being in the legal profession.

Regarding the interesting question the OP asks of what in particular the scammers are up to, unfortunately IDK.

Note ...

In a comment @JourneymanGeek reports..

We've had this happen multiple times with one company my dad once invested in.

So there has to be "something going on" with this particular type of scam. Unfortunately IDK what the scam is.

Answer 3

Definitely a scam. Some warning signs in the email:

Please find attached the documents pertaining to the investment that you made in XXX Investment currently known as XXIT (XXX XXX Investment Trust) several years ago.

Legal letters are usually very precise in their wording. I would expect a real lawyer to specify exactly which documents are attached. Not a red flag in itself, but combined with other issues below, it smells bad. Ditto for that vague "several years ago".

You, as all other shareholders, have the legal right to sell your position to our client, who is at this point in time the only buyer,

Pressure tactic: "if you don't take this offer you'll lose out".

he already has 51% control of of the common shares,

Even the browser I'm using to type this answer is smart enough to highlight "of of" as an error. It would be unusual to see this kind of mistake in a professionally-written lawyer's letter.

however, it is his intention to acquire at least 75% of the outstanding shares to gain complete control over the assets of the company. The remaining 25% would be immediately absorbed by the new owner and have no financial value whatsoever to the existing shareholder.

Pressure tactic again: "if you don't take this offer, you'll lose your shares". I'm not a lawyer, but it seems exceedingly unlikely that any such rule would exist. Who would ever invest less than a 25% stake in a company if it was possible for the other 75% to eradicate their share without recompense?

Googling on "shares 75% ownership" finds nothing relevant.

Under US law this is perfectly legal and a commonly used practice of acquiring full control through the purchase of a majority interest.

Again, suspiciously vague. No mention of which US law they're talking about. If this letter was genuine, it would be in their interests to mention the law they're invoking (e.g. a specific cite to Federal or State legal codes, or at least the legal terminology related to this claim) so you could look it up and confirm that they're telling the truth.

They don't want you checking their claims. That's a big red flag.

The company no longer trades on any stock market as it is in receivership. There is no administrative board to contact, and it doesn't even have a valid corporate ID any more, therefore research options are very limited,as you can imagine.

Sloppy writing again. Repetition of "you have no other options".

Upon receipt of your signed documentation, I will put you in the payout list.

Pretty sure "payout list" is not a legal term.

This is a first come first served situation ,so obviously time is of the essence.

More sloppy writing, more pressure to give a fast response without thinking it over. All hallmarks of a scam.

Some other considerations:

Scammers love to go after people who've already lost money (as you have in this case) because they understand that people hate to lose and will often jump at an opportunity to get their money back.

With a few shares in a defunct company, your investment is very unlikely to be worth more than a few dollars, maximum. It would cost far more than that to hire a real lawyer for the communication you've already had.

The only real question here is - what kind of scam? My first guess would be advance fee fraud. But regardless of what the game is, your best option is to stay well away. Even if you've decided not to give them your bank details, continuing contact risks giving them the impression that you're gullible enough to be worth a second try, and in a few months they may try some other attack.

Answer 4

In case I provide my bank account number (IBAN number in the EU), how will they be able to abuse this?

There are multiple ways. In this case, it could be that once you give the details, they will mention that you need to pay something [lawyer fees, capital gains tax, other such items] before they release the funds to you. Further threatening you about trying to evade something / doing something illegal and ask for more money. They may even initiate a transfer [that can be retracted later] for a large amount and ask you to refund as they send this amount in error ... etc.

What are they trying to do with me signing the PSPA / PSA documents?

Could be nothing, just trying to give it an air of credibility. Or could be they are trying to corner max shares at zero costs ... with the possibility that the company when it comes out of bankruptcy they will make an handsome gain.

Answer 5

This sounds like a scam, how really depends on the paperwork they want you to sign. Here is an additional piece that is cause for concern:

I did a reverse imagesearch on their about picture and it is a placeholder. Now there might be a reason to choose a placeholder instead of showing your partners but its at the very least unusual.

Also searching for them here did not yield any results. Granted it explicitly says that not all members are listed but the offer assistance finding a member

If you have trouble locating a member, please call us for assistance at (804)775-0530 or send an email to [email protected]

Answer 6

Whether you think it is a scam has nothing to do with reality. People too easily convince themselves of things they want to believe -- a scam is a confidence game which revolves around making you want to believe.

• The message should be presumed to be fraudulent.

Mind you, I treat exactly the same way every "latest things on Netflix" email, I would never click on any link in it and then log in. It is, at best, a "teaser" to encourage you to start independent action.

• All contact info in the email should be considered fraudulent.

Don't you dare reply to the email or call the phone number listed in the email! Even if the domain is real, the email server is compromised. The number goes to a "Vumber" or free Google Voice number. The street address will be bona-fide, but that's only to add to the appearance of legitimacy. They don't expect you to physically visit.

• Independently investigate the message found in the email, without using any resources from it.

In this case, you start by searching public information. Who is the bankruptcy receiver? Look in reputable newspapers and the like, e.g. Washingtonpost.com. Beware fake news created by the scammer.

If that just doesn't work, you can try searching for the law firm named in the email. However be careful to authenticate that they are a serious, going concern firm, not a fake law firm created by the scammer.

Look up the law firm's official web site -- choose organic search results, not advertisements which the scammer could have bought -- and call the number on the official web site.

It may be that all the info in the email checks out. It's true, non-fraudulent emails have happened. In that case, don't feel stupid, feel thorough.

By calling, you will get more attention, which may help your place in line. If it's real. Asking for your bank details so early in process seems super dodgy.

Answer 7

Similar to the reverse search of the image mentioned by @other_paul, a useful check for plagiarism is to find an 'unusual phrase' and see if it appears elsewhere.

For example, I took "caring about a client's cost restraints" from their about us page (I'd expect 'constraints' instead of 'restraints').

Using that phrase (including the quotes) in a google search reveals both the apparent source of the text (a practice in Philadelphia) and, more usefully, a warning about a now-defunct scam site using the same text and similar email footer.

As everyone seems to agree- almost certainly a scam.

Answer 8

The remaining 25% would be immediately absorbed by the new owner and have no financial value whatsoever to the existing shareholder. Under US law this is perfectly legal and a commonly used practice of acquiring full control through the purchase of a majority interest.

I'm not a lawyer, but I am certain that this is not perfectly legal and not a practice of acquiring full control.

The stock you own is an actual part of the company, and if another company is buying the company then they are legally obligated to buy your stock from you. I've had a situation where a company I had stock in approved being bought out by another company, and a per-share price was agreed upon for purchase of the company. All stockholders then received as payment the agreed upon price times the number of shares they held in the company. I had no control over the fact that the merger happened (well, a little, but I didn't own nearly enough shared to change the vote approving the merger), but everybody got paid.

Answer 9

I won't repeat JoeTaxpayer's research. That sounds very interesting and informative.

But I'll add several red flags from the text of the email.

"he already has 51% control of of the common shares, however, it is his intention to acquire at least 75% of the outstanding shares to gain complete control" Why would he need 75% to "gain complete control"? Why isn't 51% enough? Maybe there's some government regulation I'm not familiar with, but this sounds unlikely.

"The remaining 25% would be immediately absorbed by the new owner and have no financial value whatsoever to the existing shareholder." How would that be true? There are all sorts of laws in the US to protect the interests of minority shareholders. I'm not a securities lawyer, but I find it hard to believe that they would leave this gaping loophole. This sounds more like the classic sales tactic of pressuring the customer that he has to buy today or the deal will go away. Once our client gets 75%, all remaining stock will be worthless. If you don't act RIGHT NOW, you could be left out in the cold.

"Under US law this is perfectly legal" People who are doing something that is perfectly legal rarely find it necessary to tell others that what they are doing is perfectly legal. (Unless someone questions it.) When someone assures me that the product he is trying to sell me is completely legal, I figure there are two likely possibilities: (a) It is not legal, he knows that it sounds fishy, and he's trying to overcome my obvious suspicion; or (b) He wants me to think that it is just barely legal and I better get in on it before the government cracks down. When was the last time that you wrote a business memo where you found it necessary to say, "what I'm suggesting is completely legal"?

"There is no administrative board to contact, and it doesn't even have a valid corporate ID any more, therefore research options are very limited,as you can imagine." That is, there's no way for you to check if we're telling you the truth, so don't even bother to try. That sentence by itself sounds super suspicious. Note to self: If I ever try to perpetrate a scam, encourage the victims to check out the facts for themselves. The careful ones would do this anyway, and by sounding open and honest I may trick a number of people into thinking, "Well, if he's not worried about me checking him out, obviously he has nothing to hide", and maybe I'll trick them into NOT checking.

"This is a first come first served situation ,so obviously time is of the essence." Act now! While supplies last! Limited time offer! A sure sign of a scam. You can't afford to take the time to check this out -- if you do you may miss your chance!

One other little thing I noticed. On the Burke website, under their description of their practice areas, they say:

"Mergers & Acquisitions: Burke Corporate Law is a global leader among firms involved in mergers and acquisitions and other corporate transactions. The transactional experience of Burke Corporate Law ’s lawyers have allowed us to maintain our leadership position, representing a broad array of public and private companies, private equity firms, governmental entities, and other institutions and individuals in every type of M&A situation."

In a quick search I found another law firm called Skadden that says:

"Mergers & Acquisitions: Skadden is a global leader among law firms involved in mergers and acquisitions and other corporate transactions. The transactional experience of Skadden’s lawyers, the breadth of our practice and the geographical reach of our offices worldwide have allowed us to maintain our leadership position, representing a broad array of public and private companies, private equity firms and financial sponsors, investment banks, governmental entities, and other institutions and individuals in almost every type of M&A situation."

Skadden's description of their Private Equity practice was also word-for-word identical, except for substituting company name, for about half the text. Then it diverged, not sure what to make of that.

Maybe Burke copied their descriptions from Skadden, or maybe this is standard boilerplate text used by a hundred law firms. Either way, subtracts from credibility.

As JoeTaxpayer or someone said, the web site is only a few months old. So it might be that this is a new law firm and they just haven't had time to get a good website together yet. Or it could be that it's a scam and they threw together a quick web site. In fairness, the web site is much more elaborate than most scam web sites I've seen. Usually scammers just have a page or two.

Answer 10

I will dissent from the other answers here and say that this might be legitimate. If you actually bought these shares and the correspondence you received mentions those shares and it was sent to your correct address, that lends legitimacy to it because unless someone hacked a brokerage or stock clearing house or something they would not know that you owned those shares. A spammer would not send out millions of spam messages mentioning a single stock hoping that they happen to find a shareholder.

Companies do contact their shareholders occasionally and this has happened to me. For example I owned 50 shares of a stock that I had completely forgotten about. I think I got a stock certificate made for one of my kids and forgot about it. The company went through a reverse stock split and there were fractional shares which had to be paid in cash. I got a correspondence somewhat like what you received in the mail telling me to contact them about the stock, and when I did, they gave me the information I needed to access my shares.

I have also owned stock in a company that went bankrupt and as part of the bankruptcy process the lawyers sent correspondence to all shareholders to let them know what was happening, basically tell them that their investment was legally worthless, but this was a necessary step in settling the accounts in bankruptcy.

When you open a brokerage account or other account you can use to own stock (DRIP etc) you have to provide a physical address, and this goes on record with your stock holdings. If for example your broker went out of business, you still own those shares and the stock clearing house keeps track of who owns what.

As far as the 51% / 75% claim, I am familiar with this as well. The percentage of shares of a class of stock that you need to have control can vary, it is often 51% but can be higher or lower, and this can vary with different types of stock (common, preferred, restricted, etc). It can also vary by what type of corporate action they want to enact. A simple vote may require a 51% majority but a special resolution may require 75%. Special resolutions are needed for major corporate changes such as a name change, creating or retiring a class of stock, stock capitalization changes, etc.

Often when a publicly traded company goes bankrupt, the company may halt operations but the shell of the publicly traded company still exists and is registered with the SEC and has done the other legal things that are needed to be a public company. This shell company can be valuable for a small private company that wants to become publicly traded but is not yet, it is basically a back door way of going public on the cheap. There are even holders and brokers of public shell companies that will sell them to companies who are trying to go public. Doing a transaction like this usually requires a name change and other corporate actions that require a special resolution and 75% of the shareholder vote.

This is a common source of these special resolutions, companies usually have thousands of shareholders and if you had say 65% of the votes needed for a resolution, you need to round up another 10% of shareholders to get them to comply and what you would do is send correspondence exactly like what you received to the shareholders of record.

So with all of this said, I think that the situation in the correspondence is plausible. I am not a lawyer but I am a registered investment advisor and have been investing in the public markets for over 20 years. However if you don't want to take my word for any of this please Google some of these terms such as "75% special resolution", "public shell company", "stock clearing house", etc. You can also go to the SEC's Free Edgar web site and look up the SEC filings for the company, where you should see public filings describing whatever reorganization they're working on.

If you do follow up on this I would use common sense ways of avoiding being drawn into a scam. Verify any email address or phone number that you call independently. Remember that if you call anyone they will immediately get your phone number and rough geographic location from caller ID. You mentioned Burke Corporate Law, it is easy to independently verify if that company actually exists (call the bar association if you really want to be sure) and you can call their main number rather than any other number you've been given. Don't give any personal information such as your SSN, date of birth or address over the phone until you've become certain that you're talking to someone legitimate, etc. Don't give your bank account or credit card information to someone so they can make a deposit on your behalf or anything like that, this is a common scam. If you own something you should be able to call some customer service number and arrange to have your shares transferred somewhere else.