As the year of the Ponzi scheme comes to a close, the Financial Industry Regulatory Authority has issued an Investment Alert warning the public about a relatively new form of fraud: “green energy investments” that trade on investors’ affinity for keeping the planet clean.
Such schemes “promise large gains from investing in companies purportedly involved in developing or producing alternative, renewable or waste energy products,” FINRA said.
Among the companies it cited in its fraud alert was Philadelphia-based Mantria Corp., accused by the SEC last month of operating a Ponzi scheme pushed by Colorado-based Speed of Wealth LLC.
“Right now there are a lot of legitimate stories in the news about green energy initiatives, and con artists want to leverage people’s interest in green energy to make a quick buck at investors’ expense,” said John Gannon, FINRA senior vice president for Investor Education. “There is a lot of interest in companies that claim to provide green energy, but we issued this Alert to remind investors to be vigilant about avoiding investment scams, no matter how they are packaged.”
Citing the SEC’s Mantria case, FINRA said environmentally conscious investors should pay strict attention to how they’re approached in sales presentations. Language and hype used in pitches can provide important clues that a “fashionable hook” is being used to pick investors’ pockets.
“[T]he Securities and Exchange Commission alleges that promoters of purported eco-friendly investment opportunities lured 300 investors into a $30 million Ponzi scheme, encouraging participants to finance such ‘green’ initiatives of Mantria Corporation as a supposed ‘carbon negative’ housing community in rural Tennessee and a ‘biochar’ charcoal substitute made from organic waste,” FINRA said.
“Investors were falsely promised returns ranging from 17 percent to ‘hundreds of percent’ annually, FINRA continued, citing the SEC allegations. “The scammers encouraged investors attending seminars or online webinars to liquidate their traditional investments such as retirement plans, stocks, bonds, and mutual funds. Investors also were urged to borrow as much as possible against their home or business so that they could invest in Mantria. But, according the SEC’s complaint, Mantria did not generate any income from which such extraordinary returns could be paid.”
FINRA also cited other examples of alleged “green” fraud.
“One solar panel stock, for example, was touted as ‘set for a 200% gain,’” FINRA said. “A different stock in a China-based wind-power company was extolled as a ‘one in a million’ opportunity that could quickly climb to ’51X its current level.’
“In another instance,” FINRA continued, “an investment-related blog praised a company with a hydrogen-based solution, claiming the stock ‘soared 500% in one week’ and suggesting a nexus between federal energy research and the company’s prospects for growth. Specifically, the blogger noted: ‘The U.S. Government has a hydrogen initiative. Billions are being spent on hydrogen technologies. [The company] is again at the right place at the right time.’”
FINRA’s alert advises investors “to ignore unsolicited investment recommendations and to question the source of investment information. Investors should also be wary of investments that claim to be the next big thing and promise exponential returns.”
