COVID Feature: FINRA’s Tips and Tools for COVID-19 Investment Fraud

Hacking and criminal concept.A hacker in a secret hiding place is neon light.

A study conducted by FINRA and other consumer and financial organizations found that key risk factors for being scammed include social or physical isolation from others, being active online, and financial vulnerability…which sounds like a majority of the population during the COVID-19 pandemic. With new scams and schemes emerging daily, it’s important to thoroughly explore any purported “great deals” or “sure-fire” investments to avoid COVID-19 fraud.

At the heart of such investment scams are claims that a particular product or service can prevent, detect, or cure COVID-19. Investors are lured into investing in companies with assurances that their prices will soar. In one recent case, fraudulent promoters used message boards, banner ads, and pop-up ads making phony claims for products—driving up the company’s stock prices. A similar scam claimed another company had international marketing rights to an “approved coronavirus treatment”. (While a small number of drugs are being used to treat COVID-19, there are no proven and approved treatments to date….none, zero.)

Before investing, FINRA cautions consumers to:

  • Research anyone claiming to be an investment advisor or broker, using FINRA’s free BrokerCheck (If they’re not registered with BrokerCheck, that’s a red flag.)
  • Be skeptical of a new or unknown company that suddenly generates a large volume of press releases and marketing information over a short time, especially if the information hypes a stock’s upside with no mention of risk.
  • Look for public company reports in the Securities and Exchange Commission’s EDGAR database and compare them with any promotional information. (Be very suspicious if they aren’t in alignment.)
  • Be wary if a company has recently changed its name or business focus. It may signal the company is involved in a scam (or is unwittingly being used for a financial fraud scheme).
  • Use FINRA’s Scam Meter to assess whether an opportunity is too good to be true.

A final tip: stay up to date with common COVID-19 fraud by checking in regularly with reputable resources such as the Better Business Bureau, Federal Trade Commission, and Consumer Financial Protection Bureau.

Today’s Fraud of the Day comes from a FINRA Investor Insights blog, “Fraud and Coronavirus (COVID-19),” published Mar. 26, 2020.

The warning bells are ringing. From regulators, law enforcement agencies, and consumer organizations around the globe, the message is clear: fraudulent schemes related to the coronavirus (COVID-19) pandemic have arrived, and they are coming in many forms, from investment fraud to fake CDC emails to phishing scams. And unfortunately, efforts to stop the spread of the virus may put investors in a precarious position when it comes to avoiding fraud.

Job loss, financial strain and social distancing are conditions that present fraudsters with an opportunity to pounce. A study by the FINRA Investor Education Foundation, the BBB Institute for Marketplace Trust, Stanford Center on Longevity and Federal Trade Commission found that key risk factors for susceptibility to scams and losing money are social or physical isolation from others, active online engagement, and financial vulnerability.

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Larry Benson, Senior Director of Strategic Alliances, LexisNexis Risk Solutions - Government

Larry Benson is responsible for developing strategic partnerships and solutions for the government vertical. His expertise focuses on how government programs are defrauded by criminal groups, and the approaches necessary to prevent them from succeeding.

Mr. Benson has 30 years of experience in sales and business development. Before joining LexisNexis® Risk Solutions, he spent 12 years founding and managing two software technology startups. During the 1990s he spent 10 years as a Regional Director helping to grow a New England-based technology company from 300 employees to 7,000. He started his career with Martin Marietta Aerospace working on laser guided weapons and day/night vision systems.

A sought-after speaker and accomplished writer, Mr. Benson is the principal author of “Fraud of the Day,” a website dedicated to educating government officials about how criminals are defrauding government programs. He has co-authored WTF? Where’s the Fraud? How to Unmask and Stop Identity Fraud’s Drain on Our Government, and Data Personified, How Fraud is Changing the Meaning of Identity.

Benson holds a Bachelor of Science in Physics from Albright College, and earned two graduate degrees – a Master of Business Administration from Florida Institute of Technology, and a Master of Science in Engineering from Lehigh University.