FINRA Issues Warning Amid Surge in "Investment Group" Frauds on Social Media

Posted on February 8th, 2024 at 2:27 PM
FINRA Issues Warning Amid Surge in

From the desk of Jim Eccleston at Eccleston Law 

The Financial Industry Regulatory Authority (FINRA) reports a surge in investor complaints related to fraudulent "investment groups" exploiting social media platforms.

According to ThinkAdvisor, the bad actors, posing as registered investment advisers, use platforms like Instagram to advertise stock investment groups, later shifting communication to encrypted channels like WhatsApp to engage with potential investors and pitch investments. The complaints describe substantial losses, with nearly a dozen cases reported since November.

The scheme typically involves promoting well-known stocks and steering investors towards low-priced, low-volume securities, leading to price manipulation and eventual market crashes. ThinkAdvisor reported that investors are coerced to open accounts with specific broker-dealers and are guided on stock purchases, ultimately losing control over their investments. Scammers, promising to recover losses, persuade investors to transfer more funds, perpetuating the fraudulent scheme.

FINRA advises investors to exercise caution regarding unsolicited messages or social media promotions and to use tools like FINRA BrokerCheck to verify the legitimacy of investment promoters.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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