Don't Fall Prey to Investment Fraud Following a Hurricane

When you consider the financial toll of a hurricane or other natural disaster, losses due to investment fraud is most likely not something you would factor in. However investment fraud following a catastrophic natural event is quite prevalent. Many investors have found themselves in hot water after getting involved in investment opportunities related to hurricanes or other natural disasters. Scammers love using natural disasters to leverage investment fraud, as they are able to prey on vulnerabilities of both those directly affected by the event as well as those who want to help disaster victims. In the wake of Hurricane Michael, you may receive unsolicited investment offers purporting to provide some type of opportunity for returns. These offerings may be related to disaster relief, clean-up, or even storm prevention. While it’s possible some of these offerings may be legitimate, chances are high that they are either too good to be true or a flat-out scam.

Spotting Hurricane-related Investment Fraud

The SEC warns that, as property owners receive lump-sum payments from insurance companies, fraudulent entities seek to take advantage. Frauds and con-artists bank on uncertainty following a storm or natural disaster. They take advantage of people’s vulnerabilities promising quick fixes or instant relief efforts. Fraudulent companies will claim “miracle remedies” or create fake relief organizations promising aid in return for investment capital. Investors and those receiving lump-sum insurance claim payouts in the event of a storm or disaster should be wary of these types of investment scams. Hurricane-related investment scams typically rely on the same type of ploys to dupe investors. If you receive an unsolicited offer following a hurricane or natural disaster, keep an eye out for some of the following as it is likely a sign of investment fraud:

• Unrealistic predictions of rapid, exponential growth
• Reliance on facts and figures from reputable news sources to reinforce investment claims
• Reported affiliation with known government agencies or humanitarian/relief organizations
• The offer attempts to pass off a common press release as “insider” info
• Pressure to act quickly on a time-sensitive offer

Avoiding Investment Scams:

• Spam email promising high returns for investing in clean-up or relief efforts
• Pump-and-dump schemes: circulation of false or misleading news that promotes a certain product or service, inflating its stock and then dumping it before the trend peaks
• Ponzi schemes: investment scams that use investor money to pay-off prior investors
• Always ask thorough questions before involving yourself in an investment opportunity
• Make sure to know exactly what you are getting in a claim payout. If receiving a lump-sum payment, know beforehand what the money will need to cover for you and your family

How to Confront Unsolicited Offers

• Investigate the investment opportunity
  • You should never rely solely on information you receive in an unsolicited email, text message or cold call even if the information seems convincing. It’s easy for fraudsters to circulate fraudulent stock promotions through exaggerated claims about an offering’s investment value. If it sounds too good to be true, it probably is. Before agreeing to any investment offer, make sure you not only investigate the opportunity, but also the the entity behind it.
• Find out where the message originated
  • Many investment “insiders” soliciting investment opportunities are actually paid promoters. If you receive an offer, there are ways you can find out who is sending you the information and what they are getting in return for it. Look closely at the fine print of an investment offering the next time you receive one. The fine print will indicate whether the sender is earning a cash incentive or other payout for disseminating information.
• Find out where the stock trades
  • Most unsolicited stock recommendations involve stocks that can’t meet the listing requirements of The Nasdaq Stock Market, the New York Stock Exchange or other major U.S. stock exchanges. Instead, these stocks tend to be quoted on an over-the-counter (OTC) quotation platform like the OTC Bulletin Board (OTCBB) or the OTC Link Alternative Trading System (ATS) operated by OTC Markets Group, Inc. Companies that list their stocks on registered exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies quoted on the OTCBB or OTC Link generally do not have to meet any minimum listing standards (although companies quoted on the OTCBB, OTC Link’s OTCQX and OTCQB marketplaces are subject to some initial and ongoing requirements).
• Investigate the firm or entity’s SEC filings
  • Most public companies file reports with the SEC. Check the SEC’s EDGAR database to find out whether the company files with the SEC. Read the reports and verify any information you have heard about the company. But remember, the fact that a company that has registered its securities or has filed reports with the SEC doesn’t mean that the company will be a good investment.

Additional Investor Resources

You have enough to worry about following a storm or disaster. Don’t let the threat of investment scams be one of them. Protect yourself and your finances. If someone approaches you with an investment opportunity following Hurricane Matthew or another natural disaster, contact Savage Villoch Law, PLLC and make sure your investment is protected. You can also check out our blog for even more information about other types of stock and securities fraud and tips to prevent it.