Privacy settings can help head off online ‘friends’ pitching phony investments
The North American Securities Administrators Association is warning investors to beware of con artists who use social networking to promote online investment scams.
How it spreads Facebook, Twitter, LinkedIn, and even dating sites like eHarmony are being used to push fraudulent investments.
First, the con artist connects with individuals and groups, and then takes advantage of the nature of social networking to make a pitch. Because the con artist gains access to the personal information online “friends’’ have posted, it’s often easy to build up trust quickly.
And the scam can spread rapidly as the crook gains access to the friends and colleagues of the initial target.
What to watch for Red flags for online scams mirror those investors know to watch for in the offline world.
Con artists will promise high profits with little or no risk, for example. The associates said guarantees of returns on a daily, weekly, or monthly basis are often seen.
Watch out for operations that are not based in the United States, which makes it more difficult for regulators to recover investors’ funds.
Scammers may ask you to open an online account to transfer money, which may be a method to cover up the money trail. It’s common to offer bonuses for recruiting additional investors.
Targets may get sent to websites that look professional, but offer little or no information about the company’s management, location, and details about the investment.
Scam promoters often don’t provide a prospectus or other written information that explains the risks of the investment and how you can get your money out.
What to do To avoid problems, make sure you are using the privacy settings on your social network site, and don’t post personal information.
If you are not sure the investment is legitimate, do some background research by searching for the names of the individuals and companies connected to the investment. The association said that if there are few results, or the names don’t appear anywhere outside of the one investment program they’re offering, that’s a red flag. The scam artist may be using a fake identity.
The group also warns potential investors not to take testimonials seriously. A good scam could pay out high returns to the first few investors in order to set up the rest of the targets.
And don’t feel pressured to make a quick decision. If you suspect you have been targeted by a con artist, contact your state securities regulator. A list is at www.nasaa.org .
Eileen AJ Connelly writes for the Associated Press.