Part of a series about common coronavirus scams and how you can help protect yourself.
As economic impact payments, otherwise known as stimulus checks, start to roll out, one of the more common coronavirus scams you may start to see involves fraudulent investment schemes. Uncertainty in the financial markets, coupled with overwhelming demand for personal protective equipment (PPE) and a coronavirus vaccine, gives scammers an opportunity to target unsuspecting victims with risky or fraudulent investments.
What is a Fraudulent Investment Scheme?
Though there are many different types of fraudulent investment schemes - pump and dump schemes, Ponzi schemes, or high-yield investment programs to name a few – they all usually have the same characteristics: promises of a high return on your investments, high-pressure or deceptive sales tactics and ultimately, a potential loss of most or all of your investment.
Like advance fee schemes, fraudulent investment schemes can have a feel of legitimacy baked into them: after all, investing is something a lot of folks do, and it’s generally considered a wise decision depending on your financial situation. But what separates legitimate investments from fraudulent ones is the use of deception, overstated claims or false promises. Ultimately, those who fall prey to these types of investments may lose some or all of their money.
Fraudulent Coronavirus Investments
Scammers can easily take the surging demand for coronavirus treatments or vaccines and personal protective equipment (PPE) and turn it into an attractive – but fraudulent – investment proposition. On top of that, most people who receive economic impact payments will likely have a significant amount of cash on hand, making them lucrative targets for scammers. Given this, a scammer may reach out with a fraudulent investment opportunity that involves a company that:
- Supposedly has developed a cure for the coronavirus that’s going on the market soon, which will lead to a huge boost in their stock prices or company value.
- Claims they sell coronavirus treatments.
- Claims they have recently come into possession of a large supply of PPE and will be selling it at a significant markup.
- Claims they have contacts overseas where treatments or PPE is cheaper and can therefore be sold at a high markup.
What You Should Look Out For
As we mentioned earlier, deception is a key ingredient in a fraudulent investment scheme. Because of that, the scammer will likely use high pressure sales tactics when they reach out in hopes that you’ll skip doing your research on the company. While those types of sales tactics are generally your first red flag, other warning signs you should be aware of are:
- The person offering the investment opportunity reaches out to you unexpectedly, either through a phone call, email or on social media.
- Unexplained urgency or demands that you invest on the spot.The opportunity is described as “getting in on the ground floor,” “the next big thing” or a “once in a lifetime deal.”
- Promises of a high return on your investment in a short amount of time.
- The investment cannot be explained in clear, easy-to-understand language, or the person uses a lot of confusing, technical terms that are never explained.
- Claims of low risk or no risk, or specific promises or guarantees.
- Investments involving microcap stocks or “penny stocks.” These aren’t traded through a stock exchange and therefore aren’t very well regulated.
- The person claims to have “special connections,” “secrets” or “inside information” not available to the general public – this is considered insider trading and is illegal.
- The investment does not have a prospectus or offering memorandum – these documents are required by law.
What You Should Know
Regardless of what the sales pitch may be or what tactics the scammer uses, there are a couple of things you should always keep in mind: First, no drugs, treatments or therapies have been approved by the FDA to cure coronavirus at this time. Second, there’s no such thing as a risk-free or guaranteed investment. Any investment involves risk and there’s always the potential to lose some or all of your money. Any company or salesperson who claims otherwise on either of these two points is being untruthful.
In addition, you should always research any investment opportunity you’re considering taking part in. If it’s difficult to find any information about the company or products you’re considering investing in, it’s usually best to stay away.
Questions or Concerns?
We’re here to help with any questions or concerns you may have about keeping your finances secure – just reach out to your banker or give us a call at 800-497-8168, Mon - Sat, 6:00 a.m. - 9:00 p.m. MST.
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