Surge in Coronavirus Scams Is Coming, State Securities Regulators Warn

News March 31, 2020 at 02:29 PM
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State securities regulators are warning that a likely surge in fraudulent investment schemes is brewing in light of the ongoing coronavirus pandemic.

Alabama Securities Commission Director Joseph Borg, who also heads the North American Securities Administrators Association's Enforcement Section, warns that most of the scams "will simply be old scams dressed in contemporary clothing."

Said Borg Monday in a statement: "While the financial, cultural and societal changes are fresh, scammers will begin perpetrating schemes that require little or no advance planning and minimal sophistication."

Joe Rotunda, director of enforcement for the Texas State Securities Board and vice chair of NASAA's Enforcement Section, added that scammers will be targeting "retail investors, capitalizing on recent developments in the economy and preying on concerns about the regulated securities market."

Scammers' "products and tactics will track recent economic and social trends, promising lucrative returns to retail investors concerned about their investments and retirement plans. Retail investors must remain vigilant to protect themselves from these schemes," Rotunda warned.

Investors should be on the lookout for investments specifically tied to the threat of COVID-19, NASAA states.

"Bad actors can be expected to develop schemes that falsely purport to raise capital for companies manufacturing surgical masks and gowns, producing ventilators and other medical equipment, distributing small-molecule drugs and other preventative pharmaceuticals, or manufacturing vaccines and miracle cures," NASAA said.

The schemes often appear legitimate because they draw upon current news, medical reports and social and political developments.

Scammers will seek to take advantage of concerns with the volatility in the securities markets to promote "safe" investments with "guaranteed returns" including investments tied to gold, silver and other commodities, oil and gas and real estate.

Also expect "get rich quick" schemes that tout quickly earned guaranteed returns that can be used to pay for rent, utilities or other expenses, NASAA said. "These schemes also target retirees and senior citizens, falsely claiming they can quickly and safely recoup any losses to their retirement portfolios."

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