Understanding Internet Investment Fraud
The Internet is as much a part of our lives as the car we drive to work every day. In using it for business, paying bills, communication, and entertainment the Internet is an indispensable tool that helps us in many ways. Because of that, online investing has grown exponentially in recent years, unfortunately, so too has online investment fraud.
The Internet is an amazing resource for investors as it allows you to research investment opportunities across a variety of industries and avenues in which you may not have otherwise been able to by yourself, without the help of a broker. Now, investors can search information on companies and make decisions on who and when to invest. While the common investor has more means to research and invest, there’s equally as much false and misleading information aimed at defrauding you of your investment money.
Unfortunately, it can be quite difficult for investors to distinguish between real and fraudulent information and investment opportunities. Just as fraudsters used the phone or mail to try to scam unwitting investors in the past, there are equivalent means of doing so online. Some of the most used methods of online fraud occur in the following ways:
- Online investment newsletters: Generally free of charge and touting unbiased investment advice, many investment newsletters offer information on specific companies and advice for picking certain stocks. However, many fraudsters make false claims or spread false information to endorse worthless stocks. In doing so they can drive up the price of stocks to sell their own holdings at higher prices for high profits.
- Bulletin boards: Online bulletin boards have become a means of instant communication between investors. In this medium, investors can share information on investment opportunities, company announcements, new products, or worthwhile contracts. Just like in newsletters, fraudsters can post inaccurate or deliberately false information to pump up a certain stock or company. There’s often no way of knowing the true identity of the people posting on these boards and whether or not their interests are truly unbiased.
- Email Spams: In the old days, fraudsters would cold call or mass mail bogus investment schemes or false information to potential investors. Now, they can reach millions of people through bulk email programs to defraud you of investment money or to pump of stocks for their own gain.
While there can be many ways in which fraudsters use the Internet to push investment scams, it’s still a valuable tool for researching your investments. As always, it’s important to know how to use the Internet wisely when it involves your money and investing. Here are a few ways you can help ensure that who and what you’re investing in is legitimate so that you avoid potential scams:
- Search the SEC’s EDGAR database before investing in a company. This free report shows whether or not a company is registered with the SEC and provides valuable information
- Contact state securities regulators to further check on a company’s identity and the people behind it
- Check with the FINRA (formerly NASD) which provides information on partial disciplinary history on any broker or firm that is promoting a stock
- Do your own research, especially on small companies, to find financial statements, verify any claims they make on products or contracts, call suppliers or customers, and check the people behind the company
These are just a few of the ways you can help protect yourself from online fraud or investment scams. When it comes to your hard-earned money, it’s important to put in the extra effort to make sure that your investment is not only safe but will benefit your with returns as well.
If you’d like more information on online investments or if you believe you’ve been the victim of an Internet scam, please call the attorneys at Colling Gilbert Wright & Carte at 407-712-7300 today for a free consultation. We proudly serve those in the Orlando, FL areas as well as nationwide.