US Securities Regulators Issue Warnings To Investors Regarding COVID-19 Fraud


Megan Sullivan Megan Sullivan
Partner

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As the negative financial effects of COVID-19 have spread across the nation, the Securities and Exchange Commission (“SEC”), the Commodity Futures Trading Commission (“CFTC”), and the Financial Industry Regulatory Authority (“FINRA”) have issued alerts to warn about a range of fraudulent financial opportunities designed to extort investors’ fears about the virus.  The SEC’s Office of Investor Education and Advocacy explained that they have become “aware of a number of Internet promotions, including on social media, claiming that the products or services of publicly-traded companies can prevent, detect, or cure coronavirus, and that the stock of these companies will dramatically increase in value as a result[.]”  The CFTC has created a dedicated COVID-19 website on which it warns that scammers have designed pitches that include “claims of special insider knowledge or insights” or “promises of unusually large returns” targeted at investors who have suffered losses as a result of the virus.  The agencies have advised investors to conduct additional due diligence on any company advertising an advantage due to coronavirus and to identify common fraudulent tactics including, oversized returns, urgency, credibility building, customer testimonials, and freebies.  Additionally, all three agencies urge investors who believe that they may have been a victim of fraud to submit a tip or a complaint on their websites.

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