SEC: Beware Hurricane Ida Investment Scams
The US Securities and Exchange Commission (SEC) has warned investors not to fall for scams capitalizing on the Hurricane Ida recovery and clean-up operation.
The regulator’s Office of Investor Education and Advocacy claimed that disasters including hurricanes, floods and oil spills often attract opportunistic fraudsters, who use email and social media to promote their scams.
“These scams can take many forms, including promoters touting companies purportedly involved in clean-up and repair efforts, trading programs that falsely guarantee high returns, and classic Ponzi schemes where new investors’ money is used to pay money promised to earlier investors,” it explained.
“Fraudsters also may target individuals receiving compensation from insurance companies.”
The SEC said it took several enforcement actions against individuals and companies trying to cash in on the aftermath of Hurricane Katrina in 2005.
Some made misleading statements about the potential high-profits their companies could reap from clean-up efforts to inflate their share price and facilitate classic “pump and dump” scams.
“One of the best ways to avoid investment fraud is to ask questions. Be skeptical if you are approached by somebody touting an investment opportunity. Ask that person whether he or she is licensed and whether the investment they are promoting is registered with the SEC or with a state,” the regulator urged.
In terms of volume, investment scams numbered only around 8,800 last year, putting them in the bottom half of the most common types of cybercrime by victim count, according to the FBI.
However, they ranked at number three in total losses, costing victims over $336m in 2020. That puts the category behind only romance scams ($600m) and Business Email Compromise ($1.9bn).