CALGARY – The Alberta Securities Commission is warning investors to be wary of scams — especially those based on high-profile news stories.
The commission has issued its annual list of investor risks for 2017.
“Just like in the ‘Law and Order’ TV show, which rips stories from the headlines, so do fraudsters. They will capitalize on the latest crisis such as epidemics like the Zika virus or natural disasters like the earthquake and tsunami,” said Alison Trollope, the commission’s director of communications and investor education.
“All of a sudden websites will pop up touting companies. Despite being unknown, thinly traded and without revenue or actual products on the market, they’ll claim to have a new technology they claim will allow it to dominate the marketplace.”
Trollope says a number of companies claimed to be close to developing a Zika virus vaccine last year, while the 2011 nuclear accident in Japan spawned another false claim about the next generation of radiation detectors.
Trollope said it’s a classic pump-and-dump scheme.
“It’s easy to convince people that an investment that answers to a public crisis will be a safe bet, and then those behind the scam will sell their shares at these inflated prices causing the stock to crater,” she said.
“By then, the victims realize it was all a scam.”
The securities commission is also warning investors to be wary of online advertising and offshore investments. Trollope said sending cash to companies with offices in countries overseas is a red flag for investment fraud.
“Once it’s left Canada’s borders, if something goes wrong, it essentially is impossible to get your money back.”
Trollope said one of the newer concerns involves binary options, in which investors are essentially betting on whether the value of an asset will increase or decrease in a fixed time frame — as little as 10- or 15-minute spans. She said that kind of investing may appear attractive given Alberta’s current economic downturn.
But Albertans who fall victim to binary options scams lose, on average, more than $20,000.
“It’s understandable that people, if they’re feeling uncertain about the economy or uncertain about their financial future, might be more amenable to taking on risk, and fraudsters know that,” Trollope said.
“As they take advantage of a crisis, they’ll also take advantage of a downturn to their benefit and prey on those who are feeling uncertain.”
— Follow @BillGraveland on Twitter