SEC Issues Investor Alert: ‘Be On The Lookout For Investment Scams Related To Hurricane Sandy,’ Agency Says

Hurricane Sandy pounded New Jersey, New York and other parts of the eastern United States this week. The New York Daily News, via the Associated Press, reported today that the storm’s death toll has reached 74 in the United States.  Reuters is reporting the death toll in “North America” has reached “at least 82.” The storm also reportedly killed at least 69 people in the Caribbean.

In some areas, the storm knocked out power, heat, phone service, public transportation and gas stations — services that affect the lives of millions of people. It also caused devastating floods and fires. Some people do not have homes or businesses to go back to, and businesses that provide vital services to neighborhoods may be closed or inaccessible.

Looting has occurred in some areas, and now the SEC is warning about flood-related theft of a different stripe: Scammers lining up to steal insurance proceeds from those left with little or nothing in Sandy’s wake — and investment-fraud schemes, Ponzi schemes and spam capers designed to separate people from their money whether they are storm victims or not.

From an Investor Alert by the SEC today (italics added):

Hurricanes, floods, oil spills, and other disasters often give rise to investment scams. These scams can take many forms, including promoters touting companies purportedly involved in cleanup efforts, trading programs that falsely guarantee high returns, and classic Ponzi schemes where new investors’ money is used to pay money promised to earlier investors. Some scams are circulated through spam email, promising high returns for small, thinly-traded companies that supposedly will reap huge profits from recovery and cleanup efforts. For example, the SEC brought a number of enforcement actions against individuals and companies who made false and misleading statements about alleged business opportunities in light of the damage caused by Hurricane Katrina. Some of those cases involved pump-and-dump scams where fraudsters use fake “news” to pump up the stock price of small companies so they can sell shares they own at artificially high prices. We also heard about fraudsters targeting individuals receiving compensation from insurance companies. Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams related to Hurricane Sandy.

Read the full Investor Alert, issued by the SEC’s Office of Investor Education and Advocacy.


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