There's been a lot of talk in the media in recent months about green energy, both as an alternative to our dependence on fossil fuels and as a source of new jobs and investment opportunities. But as with many developments with the potential to create new wealth, the green energy field has attracted individuals with less than honorable intentions.
On January 6, FINRA issued an alert warning investors to be wary of green energy investments that promise large gains from investing in companies purportedly involved in developing or producing alternative, renewable or waste energy products.
The new investor alert, Save Your Greenbacks–Don't Fall for Green Energy Scams, explains how these frauds typically work. Among the first to adopt new technologies in their search for victims, con artists are using everything from tweets and text messages to Webinars and faxes to lure investors with very aggressive, optimistic, and potentially false and misleading statements that create unwarranted demand for shares of small, thinly traded companies, the SRO said. This is a classic "pump and dump" fraud, according to FINRA, where con artists behind the scheme then sell off their shares, leaving investors with worthless stock. Fraudsters are also using green investing as a hook for Ponzi schemes, where a scammer uses incoming funds from new investors to pay purported returns to earlier stage investors.
"Right now there are a lot of legitimate stories in the news about green energy initiatives, and con artists want to leverage people's interest in green energy to make a quick buck at investors' expense," said John Gannon, FINRA senior VP for Investor Education, in announcing the investor alert. "There is a lot of interest in companies that claim to provide green energy, but we issued this alert to remind investors to be vigilant about avoiding investment scams, no matter how they are packaged."