Wall Street Investment Fraud Lawyer Blog

The Financial Industry Regulatory Authority (FINRA) has issued a warning to investors regarding high-yield investment programs (HYIPs), which are Internet-based Ponzi schemes. These HYIPs claim to offer extraordinary returns of 20% to 100% or even more per day. FINRA warns that these HYIPs are unregistered investments that are being sold by unlicensed individuals.

FINRA advises that these investments are scams that are being promoted via social media, including Facebook, Twitter, and YouTube. Investors are unfortunately convinced that these investments are legitimate by the sophisticated promotions by the scammers.

Unfortunately, the number of HYIP scams is growing significantly. The Federal Bureau of Investigations (FBI) says that the number of new HYIP investigations grew more than 100% from 2008 - 2009. Further, these HYIPs are occurring worldwide. A recent scheme, Pathway to Prosperity, allegedly defrauded 40,000 individuals in 120 countries of $70 million.

FINRA warns that these HYIP schemes are merely Ponzi schemes. In fact, FINRA Senior Vice President John Gannon, explains that "some of these schemes encourage people to bring in new victims, while others entice investors to 'ride the Ponzi' by attempting to get in and get out before the scheme collapses." Further, many of the fraudsters pay current investors bonuses, of up to 25%, for referring new recruits or victims.

In conclusion, beware of fancy unsolicited or solicited investment promotionals. Make sure you always thoroughly research any investments and be especially skeptical of promises of high returns. Often the promise of a high return, is the first sign that an investment is a scam.

For more information regarding investment fraud, please visit our website at www.dossfirm.com or contact one of our attorneys for a free consultation.

FINRA has joined with the SEC issuing an alert warning investors of scams that are exploiting the oil spill in the gulf. Scammers are "promising financial gains from investments in companies that claim to be involved in cleanup operations."

Along with the warning, FINRA provides several tips to avoid these type of scams. First, FINRA suggests that you thoroughly investigate a company or individual before investing. Unfortunately, individuals rely on information that comes in an unsolicited correspondence sent via facsimile, email or even text message. This information often contains misrepresentations and glorified claims regarding the company's revenues, profits, contracts, or future stock price. FINRA suggests reading the fine print and finding out who sent the information. Do your research and do not rely solely on unsolicited information.

Second, FINRA advises that you should find out where the stock trades. Many of these unsolicited recommendations "involve stocks that do not meet the listing requirements of the major stock exchanges." Rather, they are often quoted on the OTC Bulletin or in the Pink Sheets. In that case, there do not exist minimum qualitative standards and likely trade infrequently, which may make it more difficult to sell any shares that you acquire. Further, when these type of shares do trade they often experience rapid price changes.

In addition, you should consider a company's SEC filings. You can check a company's filings in the SEC's EDGAR database. Be aware, however, that just because a company has made filings with the SEC it doesn't mean that investing in the company is a good idea.

Finally, use common sense and be skeptical. Remember if it is too good to be true it likely is. Look past the pitches and the theatrics and ask serious questions regarding the investment. Make sure that you also do independent research, looking beyond the salesperson and company for information regarding the investment. Also, take extra care where the investment allows immediate pay-offs, especially when the company is in its start-up phase or the service provided is still in development.

Unfortunately, scammers are often really good at promoting their "investments." Remember this is your hard earned money and don't ever invest in something that you haven't thoroughly researched.

If you believe that you are a victim of investment fraud and would like information about your legal rights, please call our firm for a free consultation.