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Beware of COVID-19 investment schemes
Posted
Schemes to Watch for and How to Protect Yourself
Private placements and off-market securities - Scammers will take advantage of concerns with the regulated securities market to promote off-market private deals. These schemes will continue to pose a threat to retail investors because private securities transactions are not subject to review by federal or state regulators. Investors must continue to ask and check before they invest in private offerings by independently verifying the facts for themselves.
Recovery schemes - Retail investors should beware of buy-low, sell-high recovery schemes where scammers, for example, promote investments tied to oil and gas, encouraging investors to purchase working or direct interests now so they can recognize significant gains after the price of oil recovers. Scammers will also begin selling equity at a discount, promising the value of the investments will significantly increase when the markets strengthen. Investors need to appreciate the risks associated with any prediction of future performance and recognize that gains in the markets may not correlate with the profitability of their investments.
Get-rich-quick schemes - Scammers will capitalize on the increased unemployment rate by falsely touting their ability to quickly earn guaranteed returns that can be used to pay for rent, utilities or other expenses. They may also target retirees and senior citizens, falsely claiming they can quickly and safely recoup any losses to their retirement portfolios. Remember: if it sounds too good to be true, it probably is.
Real estate schemes - Real estate investments may prove appealing because the real estate market has been strong and low interest rates have been increasing the demand for housing. Scammers often promote these schemes as safe and secure, claiming real estate can be sold and the proceeds can be used to cover any losses. However, real estate investments present significant risks as changes in the economy and the real estate market may negatively impact their performance.
Independent Newsmedia
The Arizona Corporation Commission offers tips on how to safeguard yourself from fraudulent investment schemes amidst the coronavirus pandemic.
The Corporation Commission alerts investors about an anticipated surge of fraudulent investment schemes resulting from the lingering pandemic, according to a press release, detailing concerns of scammers targeting investors, capitalizing on recent developments in the economy and preying on concerns about the volatile securities market.
Investors must remain vigilant to protect themselves from schemes that falsely claim to raise capital for companies manufacturing surgical masks and gowns, producing ventilators and other medical equipment, distributing preventative pharmaceuticals, or manufacturing vaccines and miracle cures.
The schemes often appear legitimate, the release said, because they take advantage of current news, medical reports and social and political developments.
“In these extraordinary times, the health and welfare of all must be our foremost concern, and that includes our financial health. The primary focus of the Securities Division remains on the protection of Arizona investors,” said ACC Chairman Bob Burns in a prepared statement.
Scammers may seek to take advantage of concerns with the volatility in the securities markets to promote “safe” investments with “guaranteed returns” including investments tied to gold, silver and other commodities; oil and gas; and real estate.
Also, investors could expect to see “get rich quick” schemes touting fast, guaranteed returns to pay for rent, utilities or other expenses, the release noted.
Some schemes, the release said, target retirees and senior citizens, falsely claiming they can quickly and safely recoup any losses to their retirement portfolios.
The Commission’s Securities Division suggests investors avoid any investment that “sounds too good to be true such as guarantees of high returns with no risk.”
To stifle investment fraud, the Corporation Commission’s Securities Division suggests asking questions, researching the investment, the company and person offering it, the release said.
Investors should always ask if the salesperson, the company and the investment itself are registered by a regulator as information can be confirmed by the Investigator on Duty at the Corporation Commission’s Securities Division.
Plus, check the SEC’s Investment Adviser Public Disclosure database and FINRA’s BrokerCheck.
Tips to avoid becoming prey to scammers:
Avoid doing business with anyone who is not authorized to sell securities.
Beware of miracle cures such as scientists and medical professionals
Avoid fraudulent charity schemes including white-collar criminals posing as charities soliciting money for those affected by COVID-19; avoid online solicitations for cash and gift cards. Work with a legitimate, established organization to donate to a cause.
Beware of schemes tied to government assistance or economic relief that requires prepayment of fees, taxes on the income, the advance payment of a processing fee or any other type of charge. Don’t give or verify any personal information as government officials already have your information.
Also, investors should verify the promoter’s licenses and registration with the Commission’s Investigator on Duty by calling 602-542-0662, toll free in Arizona at 1-866-VERIFY-9 (837-4399); or, email SecuritiesDiv@azcc.gov.
The Corporation Commission’s investor education website has information on wise investing and fraud prevention at azcc.gov/azinvestor.