Stock fraud is awful, but it should not surprise you that it happens. There are bad people out there who think nothing of stealing money from anyone they can. Stock fraud, I bet, has been happening since corporations became a thing.
Stock fraud may occur when a company defrauds investors when convincing them to buy shares in their company. The investment fraud may be a market manipulation scheme. It may be an unethical brokerage firm forcing their brokers to sell the ‘stock of the day’ knowing full-well the stock is not worth a fraction of what the price the sell to you.
But, perhaps the worst form of stock fraud, to my mind, is the stock fraud that takes advantage of people’s fear about current events. Understandably, potential investors or victims of fraud are today extremely concerned and frightened about catching Covid-19. This is especially true for that frequent target of fraudsters, older people. Not only is this segment of the population more vulnerable to Covid 19, but their fears are likely at a higher level. This set of circumstances just creates a more fertile ground for investment fraud that takes advantage of loneliness and fear such as we have today with the pandemic. So, it is vital to get the word out to older people and their children or caretakers to be especially vigilant about investment fraud phone calls.
Everyone should also take the time to connect with their parents and grandparents to make sure they understand the significant risk associated with potential Covid-19-related stock fraud. Of course, we should all take any claims of huge potential profits with a healthy dose of skepticism. But we all want to believe in the huge investment upside; these outsized profits do occur, but not that often or that quickly. And probably not from the slick-talking stockbroker pitching his or her idea.
There are fraudsters are out there right now working to capitalize on the public’s fear created by the Covid-19 pandemic and the millions of Americans who have tested positive and the more than 150,000 (as of this writing) Americans who have died from Covid-19.
Covid-19 is ripe for stock fraud because investors are rightfully very worried about Covid-19, for which there is no known cure or vaccine. There are many companies are trying to develop a response to Covid-19. With the uncertainty about the pandemic and vaccine creation coming from the government, it is easy work for an unethical salesperson to convince an investor that their recommended stock has the cure or an effective treatment almost ready. It should strike you as odd that some cold-calling stockbroker is letting you in on the greatest investment of all time. People want good news and want to believe the rosy predictions spewed by a fraudster. So, an unethical stockbroker will create and tell a tantalizing story of a company well-suited to make enormous profits from their ‘vaccine’ or ‘treatment’ – “and you, mister or missus investor can get in on the ground floor!”
Most people would understand that the first company to come out with a cure or vaccine for Covid-19 will likely make huge profits. Most would want to participate in that profit. These facts combined with a convincing stock salesperson is a dangerous mix and ripe for investment scams.
Fraudsters are pushing investments in companies that make and sell N-95 masks, or alleged Covid-19 cures, home testing kits for the disease, or even products they falsely claim give people immunity from Covid-19. In fact, according to the SEC in June 2020, it had temporarily halted trading the shares of 30 companies to protect investors and had charged companies with Covid-19 related fraud. The SEC filed charges against a company that made the false claim that they were negotiating the sale of millions of N-95 masks. Another company that the SEC charged had put out a press release stating that they had a home test kit for Covid 19 that would give results in less than 15 minutes. The SEC charged that the test kit was not intended for home and could only be used with the help of medical professionals.
Be wary of a cold-call from a slick stockbroker that purports to get you in on the only stock that cures Covid or effectively treats Covid. Reach out to your loved ones to make sure they understand the risks and to talk you before making any investment based on their fears and concerns.