The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert to help investors be better aware of fraudulent investment schemes that may involve social media. While social media can benefit investors, it also presents opportunities for criminal activity and fraud. Social media provides fraudsters an easy, low-cost way to create a site, account, email, direct message, or web page that looks and feels legitimate – giving criminals a better chance to convince you to send them your money. Once the fraud is perpetrated, it is difficult to track down the true account holders because of the anonymity that social media allows to criminals. As a result, investors need to use caution when using social media when considering an investment. The key to avoiding investment fraud on the Internet is to be an educated investor. The SEC has provided five tips to help investors avoid investment fraud on the Internet:

  • Be Wary of Unsolicited Offers to Invest – An unsolicited sales pitch may be part of a fraudulent investment scheme. If you receive an unsolicited message from someone you don’t know containing a “can’t miss” investment, your best move is to pass up the “opportunity” and report it to the SEC Complaint Center.
  • Look out for Common “Red Flags” – It sounds too good to be true; the promise of “guaranteed” returns; pressure to buy RIGHT NOW.
  • Look out for “Affinity Fraud” – Never make an investment based solely on the recommendation of a member of an organization or group to which you belong, especially if the pitch is made online. Even if you do know the person making the investment offer, be sure to check out everything – no matter how trustworthy the person seems who brings the investment opportunity to your attention.
  • Be Thoughtful About Privacy and Security Settings – Understand that unless you guard personal information, it may be available not only for your friends, but for anyone with access to the Internet – including fraudsters.
  • Ask Questions and Check Out Everything – Investigate the investment thoroughly and check the truth of every statement you are told about the investment.