While the vast majority of the economy is reeling from the novel coronavirus pandemic, some companies may emerge in a new economic landscape purporting enticing opportunities.
But those with cash looking for a big investment splash should be wary of companies claiming to have products or services that will prevent, detect or cure coronavirus (COVID-19) infection, says the B.C. Securities Commission.
“Fraudsters take advantage of global events and breaking news to lure potential investors with the expectations of significant returns. A common way they do this is through pump-and-dump schemes involving publicly traded small shell companies,” said the BCSC in a statement March 19.
Fraudsters and their associates can take control of a shell company, buy and issue themselves shares at rock-bottom prices and proceed to entice others to invest using limited or untrue publicly available information about the management team, their products or services, and their finances, notes the commission.
Beware of “hyped-up news releases, social media or paid promotional campaigns through other individuals, companies or websites.”
Once a company gets enough investors, the fraudulent promoters then sell their shares at the inflated prices, all the while no actual product to solve COVID-19 exists. The stock then becomes worthless with investors losing nearly all their money.
The commission is also warning people to exercise extreme caution during these times when being asked for personal information.
“Investors contacted by anyone with warnings about their investments or finances should never give out any personal information, and contact their investment adviser or bank separately after independently verifying the phone number to ensure the caller is legitimate.
“When investing in any company, carefully research the investment and keep in mind that fraudsters often exploit the latest crisis. If you believe that you or someone you know has been offered a fraudulent opportunity related to the coronavirus, please contact your provincial or territorial securities regulator.”