Coachella in the Bahamas: The Fyre Festival as a Warning in the New Age of Investing, Part 3

By: Esmat Hanano, IAC 2019 Spring Intern

Welcome back to the next installment in our series on the Fyre Festival. Today, we focus on the Fyre Festival’s marketing and sales tactics to potential investors and attendees. Billy McFarland hired Jerry Media and Instagram “influencers” to help implement his marketing campaign. The influencers were dubbed “Fyre Starters” and used to “ignite” a “coordinated influencers marketing campaign.” The Festival hired 400 of these Fyre Starters and envisioned working with them in the future as brand partners. Further, McFarland filmed a promotional video with eight of these Fyre Starters to announce the Festival to potential investors and attendees. These marketing tactics were directed at millennials and Gen Z social media users. The organizers promised attendees would experience morning yoga on the beach, meditation, massages, henna tattooing, Bahamian-style sushi, luxury villas, and an extensive line-up of musical artists. In addition to all these experiences, McFarland stated that the Festival would take place on a private island in the Bahamas once owned by Pablo Escobar. Continue reading

Losing the Game: Video Game Business Charged with Fraud

By Caitlyn Scofield, Spring 2019 IAC Student intern

As millennials come to the age where they are investing, they often follow the old mantra stick to what you know and often what we know is the power of social media and mobile gaming. This relatively new and burgeoning industry has become a gold mine for investors and entrepreneurs due to microtransactions and ad revenue.  This force driven by monetary transactions ranging from .99 cents to hundreds of dollars has a business model which focuses on what are referred to as “whales” in the industry. These are individuals who instead of making periodic small in-game purchases spend thousands of dollars on one game.  Many innovative and driven individuals have made significant profits following this trend. Yet not all entrepreneurs want to put in the effort to make their business successful and instead take advantage of hopeful investors. Continue reading

Investor Alert: Self-Directed IRAs Risky Diversity

By: Caitlyn Scofield, Spring 2019 IAC Student Intern

Everyone loves having options, whether it is choosing where to go to dinner or what shirt to wear for that big interview more options are better. This holds true in the realm of investments as well. IRAs, Individual Retirement Accounts, allow individuals to prepare for their future while affording several tax benefits. These types of accounts are usually limited by the custodians to conventional investments. For those sophisticated investors that want more options, a self-directed IRA allows investors to diversify their investments by allowing them to invest in a broader set of options including non-conventional or alternative asset investments such as cryptocurrencies and real estate. While these options allow for more options it also opens investors up to a lot of risk, so investors should be very aware of potential harm before they sign up.  Continue reading

Wednesday’s Word: Boiler Room

By Ben Dell’Orto, Spring 2018 IAC Student Intern

In addition to inspiring a Hollywood movie, Boiler Rooms are a common scheme to pressure investors into purchasing an investment that most likely is not a good one for them. The scheme involves a large group of “salesmen” trying to attract as many investors as possible to the scam. The most common method is through cold calling, where the schemers use high-pressure sales tactics to encourage the potential investor on the other end of the phone call to take advantage of an investment that will yield “high returns” and “no risk” but is only available for a short time. FINRA notes that the caller will often attempt to explain the miracle investment by suggesting that it is founded in an emerging industry or will “play off recent events” to lend legitimacy to the lie. One recently-busted scam in England took advantage of the rising wine industry, and this blog reported on a recent FINRA report of scams increasing on this side of the pond.

While previously usually conducted over the phone, the SEC adds that boiler rooms now may use “emails, text messages, social media, and other means.” These methods lack the pressure created by a persuasive voice speaking directly over the phone, but can still be effective by suggesting that the time to buy is limited, or by pestering with frequent messages.

The most important thing to remember to avoid falling victim to a Boiler Room scheme is to

Take.

Your.

Time.

The fraudsters behind this kind of scheme are relying on a quick decision, so taking a moment to run a broker check and an internet search of the investment before buying will save you from taking a big loss.

Dangerous Clickbait: The SEC Warns Investors About Paid-to-Click Scams

By: Esmat Hanano, IAC Student Intern Spring 2018

At the tail-end of last year, the Securities and Exchange Commission (SEC) issued a warning to investors about Paid-To-Click (PTC) scams. PTC websites “…promise investors a share of the program’s profits in exchange for paying an upfront fee or buying products.” The PTC site might even promise the investor advertising space on its network of ads in addition to a share in the program’s profits. In this way PTC sites seem to offer the best way of making money on the internet—buy online “ad packs” then sit back and watch as your profits roll in! However, the SEC warns that these websites are being used to further Ponzi schemes. In fraudulent schemes, a new investor will place money in a PTC program which will then be sent to previous investors in the same program as their “profits.” Not all PTC sites are malicious, but investors thinking about buying into such programs must be wary of the promises these websites make. Continue reading

FINRA’s Crypt[ic] Message

By W. Dowdy White, Spring 2018 IAC Student Intern

If you were going to walk across a balance beam one hundred feet in the air, would you prefer for that beam to be made out of either steel or a toothpick? The answer to that question is easy – everyone would pick steel. If you were investing all of your money with the risk of losing it all, would you prefer to invest in a fund that promises huge returns at a high risk or would you rather invest in a fund that promises small returns at a low risk? The answer to that question is bit more difficult to answer.

Cryptocurrencies are currently the latest fad in investing. Specifically, consumers flock to these investments by the boatload because these funds promise exponentially high returns. However, according to a recent investor alert from the Financial Industry Regulatory Authority (FINRA) in December 2017, cryptocurrencies may not be the slam-dunk investment that everyone makes them out to be. In fact, FINRA warns potential investors not to be fooled by “unrealistic predictions of returns and claims made through press releases, spam emails, or posted online . . .” at the risk of their money vanishing into thin air.

There have been many cryptocurrency-related stock scams over the past several years. In fact, the Securities and Exchange Commission (SEC) suspended trading in a large number of securities because of some questions about the accuracy of some cryptocurrency-related activities. Specifically, the SEC questioned the accuracy of claims ranging from the value of the assets of the now-defunct company, DIBCOINS, to statements by several companies who planned to conduct Initial Coin Offerings (ICO).

Because of the very prominent success of companies like Bitcoin, the cryptocurrency marketplace is emphatically booming. With more cryptocurrencies appearing on the market on a regular basis, it is easy for company promoters to make outrageous claims about their product without the research and facts to back them up. To assist consumers in avoiding these situations, FINRA released six tips to avoid costly mistakes in cryptocurrency investing.

Continue reading

Professional Financial Adviser’s Pitch Goes Horribly Wrong to Professional Athletes

By Qudsia Shafiq, Fall 2017 IAC Student Intern

What can happen when a financial adviser meets deep-pocketed athletes who refuse to invest in his movie venture proposals? For one financial adviser, this meant ignoring the pros that told him no.

On May 6, 2016, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Louis Martin Blazer III for allegedly repeatedly taking money from his clients under the guise of raising money for two film projects: “Mafia the Movie” and “Sibling.” The SEC charged Blazer, a Pennsylvania-based financial adviser with defrauding pro athletes and lying to SEC Examiners. The high-end, concierge firm allegedly took nearly $2.35 million from five different clients without their consent, all to invest in the two movie projects. Continue reading