Fraudsters On The Prowl
If you’re an electronic cigarette user, then you’ve probably heard by now about the stock scams that are becoming more and more widespread as the popularity of e-cigarettes continues to grow. Although this new technology has created some legitimate investment opportunities in recent months, it has also paved the way for scammers and stock fraud.
Potential investors are lured by radical claims through emails, press releases, and other various promotions, which in turn create a greater demand for company share’s. But once the share price spikes, the scammers will sell off their shares at a profit and then stop promoting the stock, causing the price to fall and leaving investors with worthless stock.
Tips To Avoiding A Scam
- Start with doing a search of the company on the Internet. Look for any indictments of company officials or news reports that raise red flags. If you can, contact the company’s personnel. Check with the Better Business Bureau for bogus reports. Doing a search online can also turn up non-working phone numbers and fake mailing and email addresses.
- Be skeptical of press releases, spam emails, promotional items, and posts on social media websites that sound too good to be true. (They probably are!) Many companies will pay people to post fake claims in order to create a flurry of hype over a product. Companies and their promoters will make exaggerated remarks about their technology, contracts or acquisitions, future stock prices, or potential profits. If you are bombarded with information over a short period of time, this should make you question the company’s credibility. Hundreds of press releases issued in rapid order can mark a serious problem. A good rule of thumb: If it sounds too good to be true, then chances are it probably is. Don’t believe the hype.
- Be wary of any company that talks of receiving a “seal of approval” or other similar award for its products. Believe it or not, companies can pay a fee to receive such praise from various organizations.
- Read up on a company’s filing with the SEC (Security and Exchanges Commission) and verify the reports against any promotional materials you might have received to make sure they coincide.
- Companies that list their stocks on registered exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders.
- Be leery of requests to invest when products are still in development, but no actual products are being sold on the market.
- Another major red flag is noticing a frequent change in the company name, which can signal that the company is partaking in a potential fraud. Also, watch out for companies that constantly promote new product lines.
- Pay attention to claims that come with unsolicited information you read about a company. Read the fine print. While reading disclosure statements in promotional items, you might discover that the senders have been paid large amounts of money to send out hype and optimism over a company’s stock.