The Investor’s Watchdog

The Investor's Watchdog

Don’t Fall Victim to Internet Investment Scams

Monday, March 18, 2019

When you can easily research investments, move money with the click of a button and check on your portfolio from the comfort of your couch, it’s easy to see why as an investor, you’d rely so heavily on the internet. However, as convenient as the internet makes things, it is also just as convenient for fraudsters. Scammers are continuously becoming more sophisticated and are using technology to target their victims.

Some common types of internet investment fraud include:

  • Online newsletters – Newsletters can be a great source of information and advice, however, they can also be a vehicle for fraud. The information found in a newsletter may seem unbiased when in fact companies are paying the publication to recommend their investments. While this isn’t necessarily illegal, the newsletter must disclose to readers if this is happening. Always be cautious of newsletters that fail to do this or try to bury their disclaimers.
  • Forums and bulletin boards – Online forums or bulletin boards can be another source of misleading, or downright fraudulent, information. Fraudsters have been known to use these bulletin boards to share “insider information” or drum up excitement about a certain company when none of the information is actually true. It’s also impossible to tell whether the person behind the screen is credible or not as many of these websites allow users to hide their identities.
  • Email spam – We’ve all seen emails that are blatant spam. However, these days, spammers are getting far more sophisticated in making spam emails look legitimate. Fraudsters often use mass emails to promote their investment schemes or spread fake information about a company because it’s a cheap and simple way to reach a large audience.
  • Pyramid schemes – A pyramid scheme is an investment that involves continuously recruiting paying sales partners at various levels. These are notorious “get rich” scams, however, the only people profiting are those at the top of the pyramid. Pyramid schemes are commonly presented to potential partners via social media or email, oftentimes by friends and family.
  • Pump and dump schemes – The internet makes it easy to convey a sense of urgency, encouraging investors to act quickly and buy or sell stock before the price fluctuates. This is often a pump and dump scheme, where investors heavily promote a stock and then sell their shares after the price surges as a result of the endorsement.

Keep the following tips in mind when making investments:

  • Exercise caution when making any type of investment online. There’s no harm in staying alert, skeptical and informed.
  • No matter the source of your advice, do your own research in order to make educated investment decisions.
  • Pay close attention to website URLs and email addresses. Scammers oftentimes change just a couple characters in hopes the victim won’t notice.
  • If you receive investment newsletters, read the disclosures carefully. Exercise caution if there’s no disclosure at all.
  • Never send money or give personal information to unknown internet contacts.

If you believe you’ve been the victim on an online scam, act immediately. Call the investment fraud lawyers at ChapmanAlbin.

Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

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