Readers: I know I have been including a lot of articles about scams lately, but obviously there is a lot of info to give out. The scammers are out and they’re trying to get a piece of you. Social networking is big these days, (FaceBook, Twitter, etc.) and the scammers know it.
I found this article by Scambusters particularly interesting and enlightening. Be sure to hit the hyperlinks too – there’s a lot of good stuff here that you don’t want to miss. I’d hate for any of my readers to be scammed, again.
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Are Facebook and Twitter Next For Investment Scams?
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Hear the cry of the investment scams artist: It’s going to be the next big thing; it’s going to change the game; hardly anyone knows about it… yet.
They’re going to let you in on the secret, so you should sell the family silver and pile the proceeds into whatever it is they’re selling.
It’s always the same old song, but often sung in a different voice. And it seems there are plenty of people who are willing to listen.
We covered investment scams in some depth in previous issues:
But now, there are new worries about the growing use of the Internet as a vehicle for investment scams, especially on social networks like Facebook and Twitter and in blogs.
These sites have taken over from the old Internet bulletin boards and chat rooms where “pump and dump” scammers would try to promote their stocks.
You could say it’s the next big thing in the Internet investment scams world.
In fact, the main regulator of US security firms, the Financial Industry Regulatory Authority (FINRA), has recently issued guidance to its members about what they should and shouldn’t say about the investments they promote in blogs and on social networks.
Their message, basically, is: “We’re watching you.”
Regulators and law enforcement agencies are particularly worried about the risk of affinity fraud on these sites.
Affinity scams, which we also covered in issue #124, rely on people building and exploiting friendships, which is precisely what social networking sites do. (I blogged about it here too)
You get a bunch of friends or followers, lull them into thinking you’re a good guy, then you pass on your bogus investment tip.
New wave of green scams
And it’s not just stocks and shares the latest investments scams artists are pushing. Wherever there’s a leading edge in technology or a topical issue that’s attracting major public interest, you’ll find the crooks.
In particular, FINRA has also recently expressed concern about tech-related green scams — online and offline.
“Right now there are a lot of legitimate stories in the news about green energy initiatives and con artists want to leverage people’s interest in green energy to make a quick buck at investors’ expense,” says John Gannon, the organization’s VP for Investor Education.
“There is a lot of interest in companies that claim to provide green energy, but (we want) to remind investors to be vigilant about avoiding investment scams, no matter how they are packaged.”
The latest green investment scam tricks, for instance, include:
* Solar stock “pump and dump” schemes touting a 200% gain.
* Investing in a supposed substitute for charcoal made from
organic waste or a system for converting plastic to oil at $10
a barrel.
* An opportunity to invest in environment-related patents in
which the fraudster holds out the prospect of a 1,000% return!
Crazy, isn’t it? But investors still plowed in their money.
Worse still, these investment scams crooks love nothing better than spinning such a convincing tale that their victims even remortgage their homes, sell everything they’ve got and cash in their IRAs and 401Ks to get in on the next big thing – which turns out to be the scammers’ bank accounts.
You probably read our earlier report on green scams, in which we warned about renewable technology and miracle device scams.
And since we are enthusiastic fans and practical users of green technology, our message was and is to make sure you know your stuff, so you can indentify genuine opportunities in this market, both for investing and for using.
More tricks — and 10 tips
Another trick investment scams artists use to fool victims is to link into news events, especially those that prey on public fear.
For instance, after numerous anthrax-in-the-mail scares, one con man claimed latex gloves would be the next big thing and investors duly poured their savings into a bogus manufacturing scheme. Instead, the money went to buy, among other things, luxury seats for the scammer at Dodger Stadium.
Then, there are those tricks which just play on the willingness of victims to believe there’s an opportunity to make big money that no one else knows about.
In one recent high profile-case, TV actor Kiefer Sutherland was reported to be the victim of a scam in which he was convinced to invest in a deal that promised huge profits by purchasing cattle in Mexico and reselling them in the US.
Sutherland, among others, supposedly parted with a large six figure sum but there’s no evidence that the livestock were ever bought.
So, how do you spot potential scams and distinguish frauds from legitimate investment opportunities?
FINRA offers this list of what they call “rip-off tips” – things that should put you on alert:
* Unsolicited communication such as faxes, emails, text
messages, tweets (on Twitter), and strategically placed
“opinions” in blogs and message boards.
* Seminars and webinars that use short-term incentives and
bonuses.
* Price targets or predictions of swift and exponential growth.
* The use of facts from respected news sources to bolster
claims of the size of the market for a new product or
technology.
* Mention of associations with or actions by governments that
bolster a company’s product or service.
* References to actions by well-known companies used to
justify growth of the company being touted.
* Claims that they’re the next big thing (yes!).
* Products that are only at the development stage.
* Unverifiable claims of enormous energy efficiency.
* Pressure to invest immediately.
Naturally, there are legitimate investments that use some of these tactics (such as predictions of swift or exponential growth, facts from respected news sources, well-known companies or government actions to bolster claims, and development stage products). However, it is good to be very skeptical.
Actually, FINRA has a useful “scam meter” on its website that allows you to check out your thoughts about an investment opportunity.
We certainly don’t recommend that you use this as the last word on the authenticity of an investment, but it’s worth a run-through to confirm your own suspicions.
These tips will help you avoid green scams and other investment scams — on and off the social networking sites.
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Readers: I’ll check in and respond tomorrow. Happy Friday!
Lastly, greed over a great story is surfacing from my ‘loyal’(?) readers. With all this back and forth about who owns what, that appears on my blog, let me reiterate thatall material posted on my blog becomes the sole property of my blog. If you want to reserve any proprietary rights don’t post it to my blog. I will prominently display this caveat on my blog from now on to remind those who may have forgotten this notice.
Gratefully your blog host,
michelle
Aka BABE: We all know what this means by now :)
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