According to an online story on The Street.com, Facebook investment scams are proliferating on the Web and investors should be on the lookout, the securities industry’s main self-policing organization warned on Tuesday.
Financial Industry Regulatory Authority (FINRA) warned in a a statement that con-artists have been pitching fake investments in Facebook and other “well-known social media companies.” The scams usually take the form of “pre-IPOs”, or the sale of unregistered shares in a private company to an investor prior to the initial public offering.
The release notes the Securities and Exchange Commission (SEC) recently settled a civil action against one trader “who allegedly bilked more than 50 U.S. and foreign investors out of more than $9.6 million in a series of pre-IPO scams involving purported shares of Facebook, Google and other well-known companies.”
Among the tips FINRA is disseminating to the public, the release urges investors to ask themselves “why would a total stranger tell me about a really great investment opportunity?'”
The warning comes as Wall Street firms like JPMorgan Chase and Goldman Sachs have climbed aboard a mini-Gold Rush in hot, privately-traded social media companies.
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