PA Securities Commission Alert: Don't Take Candy from Strangers, or Stock Tips from Internet "Friends"
Sep 12, 2011, 01:11 ET
HARRISBURG, Pa., Sept. 12, 2011 /PRNewswire/ -- The Pennsylvania Securities Commission (PSC) today warned unwary investors that times of economic turbulence like the current stock market attracts scam artists and flawed "get rich quick schemes."
Mothers give good advice: "Never take candy from strangers." Today, the PSC adds a modern corollary: "Not everyone who seeks to 'friend' you on the Internet has favorable intentions."
As people increasingly turn to online social networking sites to interact with one another, so have con artists who lurk in the virtual shadows with shady investment deals to pitch to unsuspecting investors, states the commission.
"Almost everyone with an Internet email address knows by now that the world is not full of Nigerian princes who single out middle-class Americans to help them invest millions of dollars from some secret account," said Commission Chairman Robert Lam. "By the same token, would-be investors need to make sure they know who they are doing business with when considering investments pitched through 'friends' on social networking sites."
Adds Commissioner Tom Michlovic, "Just because someone has 'friended' you online does not mean that person is your friend when it comes to investing. The person behind the profile may be deliberately mimicking your likes and interests to lure you into a scam."
Con artists have launched "affinity fraud" schemes for years by targeting victims through traditional offline social networks, such as community service groups, professional associations or faith-based organizations. "Scammers infiltrate groups of individuals connected through common interests, hobbies, lifestyles, professions or faith to establish strong bonds through face-to-face contact and sharing of personal interests before launching their schemes," Commissioner Steven Irwin explained. "And today's Internet is just filled with thousands of new forms of affinity groups."
The rise in popularity of websites such as Facebook, Twitter, LinkedIn, eHarmony and other online social networks and communities has made it easier for con artists to quickly establish trust and credibility. "Crooks peddling scams increasingly are logging on to find investors and their money," Lam said.
Online social networking sites enable scammers to gain access to potential victims through their online profiles, which may contain sensitive personal information such as their dates or places of birth, phone numbers, home addresses, religious and political views, employment histories, and even personal photographs.
"A con artist can take advantage of how easily people share background and personal information online and use this information to make a highly targeted pitch to 'friends' within that social group," Michlovic said.
The commission alert advises investors to watch for red flags common to online investment schemes, such as promises of high returns with no risk, operations based offshore and requests for payment through e-currency websites. The alert also offers tips on how to protect against fraud in social networking: protect your personal information; search the names of all persons and companies connected to the investment being offered; beware of the use of testimonials from "satisfied" investors; obtain a prospectus; don't take the word of a salesperson; and contact the Pennsylvania Securities Commission to determine if the investment and the person recommending it are properly registered.
"Take time to check out the investment yourself, and remember, the Internet created new ways to communicate; it didn't change the rules for investing," Irwin said.
The alert is available online at www.psc.state.pa.us. For more information, contact the Pennsylvania Securities Commission, toll free, at 1-800-600-0007.
SOURCE Pennsylvania Securities Commission
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