NEW YORK (AP) ? The North American Securities Administrators Association is warning investors to beware of con artists using social networking to promote online investment scams.
HOW IT SPREADS
The association says con artists are using Facebook, Twitter, LinkedIn and even dating sites like eHarmony to push online investment scams.
First, they connect with individuals and groups, and then they take advantage of the nature of social networking to make their pitch. Because the con artists gain access to the personal information their online “friends” and connections have posted, it’s often easy to build up trust quickly, NASAA said.
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. NASAA said guarantees of returns on a daily, weekly or monthly basis are often seen.
Watch out for operations that are not based in the U.S., which makes it more difficult for regulators to shut down the scam and 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 into the scheme.
Targets may get sent to websites that look professional, but offer little to no information about the company’s management, location or details about the investment.
Scam promoters often don’t provide a prospectus or other form of 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’re using the privacy settings on your social network site and don’t post personal information.
If you’re not sure if the investment is legitimate, do some background research by searching for the names of the individuals and companies connected to the investment. The NASAA said 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 that they 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. Instead, ask for a prospectus and other legitimate paperwork.
And don’t feel pressured to make a quick decision that doesn’t give you time to check out the investment yourself.
If you suspect you’ve been targeted by a con artist, contact your state securities regulator. A list is available on the association’s website at www.nasaa.org . The site also has more detail on scams.