(originally published July 2010)
A few short months ago, a deepwater drilling rig exploded near the Gulf Coast causing oil to gush into the water. As executives struggled to find a quick solution, one company, InfrAegis Inc., allegedly told potential investors in Alabama the product they created would stop the oil leak and had the support of government officials involved in the cleanup. In reality, according to the Alabama Securities Commission, the company was not registered to sell stocks and appeared to be exploiting the oil crisis to take advantage of unsuspecting investors.
Fraudsters stealing from headlines to steal from investors is unfortunately another in a long line of scams. Whether it’s the oil spill in the Gulf Coast, earthquakes in Haiti or similar events, fraudsters will tout investment opportunities in a product or company related to actual relief efforts. They play off of emotions such as empathy for those impacted by the situation or frustration over the lack of a quick solution to persuade victims to invest.
Although the people and places affected by these types of events are often in great need of support, it’s important to protect your savings from fraudsters and ensure your money is actually going to relief efforts. One of most important steps you can take when approached about an investment opportunity is to call my office’s Securities Division at 1-800-223-8791 or use the searchable databases online at www.IndianaInvestmentWatch.com to make sure the person and the investment itself are licensed and registered. Even if the person is based in another state, they are still required to register with my office to sell securities in Indiana.
Watch out for sales pitches that overuse jargon or scientific terms. Fraudsters may rely on these to appear more legitimate than they really are and may go as far as making up words or phrases. The average investor, for example, likely doesn’t have an extensive knowledge of the technology used to clean up oil spills and will not recognize when a fraudster is using inappropriate terms or phrases. When in doubt, take time to do your research and get a second opinion from a licensed financial services professional.
Also, make sure you get something in writing. Every investment opportunity should have a circular or prospectus that outlines the details of the investment. If the person offering the investment is unwilling to put something in writing, it’s a red flag they may be committing fraud. Additionally, if they are hesitant to answer your questions about the investment, you should walk away immediately. Legitimate, licensed professionals should not hesitate to be transparent and give you all the information you need.
Using the latest headlines to take advantage of people is not unique to investment fraud. You should also use caution with charitable organizations asking for donations to relief efforts. Again, it’s admirable that people want to help, but important to make sure donations don’t end up in the pockets of scam artists. Use resources like http://charitynavigator.org or the Better Business Bureau’s Wise Giving Alliance, www.give.org, to fully research a charity or business. On these sites you can find out about the organization’s tax status, financial statements, if they’ve had complaints against them in the past and much more.
Bottom line: You can never be too careful when it comes to protecting your savings so use caution when investing in or donating to relief efforts. Visit www.IndianaInvestmentWatch.com for more tips and tools.