By Kelly Robinson, Spring 2016 Student Intern
In today’s interconnected world, news spreads quickly. Social media and other news outlets disseminate information (whether true or not) and a story explodes. While the latest story about Justin Bieber may not lead you towards a particular investment, those stories that potentially affect our businesses or livelihoods tend to create a lot of hype and fear, and in turn, also create lucrative investment scams (think Y2K).
The Zika Virus (or Ebola, or Swine Flu, or [insert other illness here]) all feed an interest in products that claim to prevent the spread of the disease or fight its symptoms. Scammers will aggressively promote these stocks, sometimes using false proclamations of success or overly-optimistic statements about the product’s benefits. The aggressive promotion inflates the price of the stock as people buy in, which is when the scammers then sell their stocks at a premium, leaving others with unprofitable stocks.
Scammers have taken this “sick twist” on the classic pump and dump scheme into the modern era by using social media and related apps to further hype the stock. This hype can be as simple as commenting about the stock under a Zika Virus news article, to push notifications touting the success of the stock sent directly to consumers of various apps, to more sophisticated scams involving the creation of a webpage with links to success stories and the like. Remember, it is ALWAYS a good idea to be especially careful with social media investment promotions as they may be scams (or at least poor investments) and it can be difficult to track the creator/promoter. If you’re looking for more ways to protect yourself, FINRA has an excellent podcast on what to look out for here.