SEC Warns of Investment Scams after Recent Uptick in Complaints


The Securities and Exchange Commission recently provided an Investor Alert statement addressing new developments on investment scam complaints in the past year.

The SEC recognizes that there has been a recent uptick in activity for such complaints. This recent increase seems to be attributed to the effects of the pandemic, according to the SEC. In its statement, the SEC stated that “fraudsters use times of uncertainty and change” to take advantage of victims.

How Can a Pandemic Lead to Investment Scams?

As people face uncertainty, especially financial uncertainty, their behavior may be more reckless than normal. Additionally, a large group of inexperienced internet users transitioned into online life without understanding the potential risks of using the internet. This combination of uncertainty and unfamiliarity does not bode well for many individuals.

Consequently, scam artists saw an attractive entry point and decided to take advantage of the situation. Scammers continue to develop elaborate internet scams to entice people that may not suspect any wrongdoing.

What Should I Look Out For?

SEC officials provided particular warnings on a number of schemes that scam artists are employing. These include Ponzi Schemes, fake CDs, stock promotions, and other similar scams.

Ponzi Schemes

We have written extensively on Ponzi Schemes and how to protect yourself against them. Scam artists that create Ponzi schemes target victims with the promise of little to no risk with suspiciously high returns. We strongly caution against individuals or companies promoting investments with these characteristics, especially if the investment is unregistered or the seller is unlicensed.

Fake CDs

The SEC is also cautioning individuals to be aware of those offering fake certificates of deposit, otherwise known as CDs. Scam artists may be impersonating financial institutions through emails, advertisements, and other forms of online communication.

The SEC states that these scam artists often promote high-yield CDs that require investors to wire money to suspicious accounts. These accounts may be overseas and/or have a different name than the apparent financial institution offering such investment products.

Virus-Related Stock Promotions

Scam artists may also utilize online platforms to provide unsolicited “advice” to unsuspecting individuals. This often relates to a particular company that could be “poised to profit from the current pandemic,” as the SEC states.

Scam artists using this method will often promote a stock only for the purpose of selling it at a much higher price later. This tactic, often referred to as a “pump and dump” scam, ultimately leaves the average investor stuck with a worthless investment with virtually no exit opportunity. Be aware of individuals and companies promoting any such publicly traded company under the premise that it is destined to succeed because of the virus. This also applies to private companies – be mindful of scam artists attempting to extort money for similar reasons.

Final Thoughts

Overall, it is crucial that you know exactly where your money is going for any investment. This is especially true today when the chances of becoming a victim to investment fraud seems to continually increase. As long as you take precautions against suspicious activity as mentioned above, you will decrease your chances of becoming a victim and making a horrible decision.

Remember, whatever it is, let’s make sure our money is working for us and not for somebody else.

If you suspect that you are a victim of investment fraud, please contact us today at 239-319-4434 to schedule your confidential, no-cost consultation with our experienced Securities Litigation attorneys.