Is Social Networking the Next Breeding Ground for Investment Fraud?

by Wall Street Fraud on September 28, 2011

Investment fraud lawsuitSocial networks such as such as Facebook, Twitter, LinkedIn, and eHarmony (to name just a few) may be the next breeding ground for investment fraud, according to state and federal regulators. The North American Securities Administrators Association (NASAA) recently issued an investor alert that cautioned investors to thoroughly investigate investments pitched through “friends” on social networking sites.

“Just because someone has ‘friended’ you online does not mean that person is your friend when it comes to investing,” said NASAA President and North Carolina Deputy Securities Administrator David Massey. “The person behind the profile may be deliberately mimicking your likes and interests to lure you into a scam.”

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 by using this information to make a highly targeted pitch to “friends” within that social group,” Massey said.

NASAA’s alert advises investors to watch for red flags common to online investment schemes:

  • Promises of high returns with no risk;
  • Offshore operations;
  • Requests for payment through e-currency websites;
  • Offers of bonuses to recruit your friends into the scheme; and
  • Professional-looking websites with little to no information about the company and no written information about the investment, such as a prospectus detailing the investment’s risks and procedures to get your money out.

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 names or testimonials from “satisfied” investors;
  • Obtain a prospectus;
  • Don’t take the word of a salesperson; and
  • Contact your state or provincial securities regulator to determine if the investment and the person recommending it are properly registered.

At Wall Street Fraud, we are dedicated to offering assistance to those who have been hurt by improper corporate or investment practices.

If you have been the victim of stock brokerage fraud, securities fraud, mutual fund fraud, stockbroker fraud, annuities fraud, or any other type of investment fraud, please contact us today for a free case evaluation. Our talented and aggressive legal and professional staff is eager to help you recover your losses.

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