Finra warns about slew of pump-and-dump schemes aimed at milking disaster in Nippon
Two months after Japan's devastating earthquake and the resulting nuclear disaster, financial regulators are warning investors about new scams that tout solutions to the Pacific nation's troubles.
In these “pump and dump” schemes, con artists seek investors in companies that they promise can detect gamma rays, clean up nuclear waste, create earthquake-resistant structures or market other services that Japan needs.
Aggressive, misleading and many times false press releases try to boost company shares for long enough to allow the criminals to sell off their shares at the higher prices, said the Financial Industry Regulatory Authority Inc., which issued the investor alert.
“Unfortunately, a nation's tragedy is being used as just another pretext to part investors from their savings,” said John Gannon, a Finra senior vice president. “Disasters provide a perfect opportunity for the unscrupulous to steal money from the unwary.”
Similarly, investment scams like these emerged after Hurricane Katrina in 2005 and last year's oil spill into the Gulf of Mexico, he said.
The fraudulent investment scams could come through phone calls, fax, e-mail messages, text message solicitations, webinars, infomercials, tweets, blogs or message board posts, Finra said. All seek to capitalize on the media spotlight on those disasters.
In one recent instance, a company promoted the development of an earthquake-resistant building, even though the firm's design had been tested only once on a “shaker table” that simulates earthquakes, Finra said.
The alert recommends ignoring unsolicited investment recommendations and reminds people to be wary of any investment that makes unrealistic promises or touts a connection to the federal government, a foreign government or well-known corporations.
