Marijuana is now legal in 20 states, and more are sure to follow. As pot goes mainstream, so does the money associated with it – and that means doors are opening for investors to get in on the ground floor with the Next Big Thing. And where legitimate investing opportunities show up, so do the scams. Now, new email and social media scams are targeting would be investors in marijuana futures.
A recent CNN Money report notes that the number of spam emails related to marijuana investing schemes – along with a variety of other financial scams — has spiked just in the last year. The main strategy in
these scams, according to federal fraud investigators, is called a “pump and dump” stock scam.
Here’s how it works. Scammers send unsolicited emails and post notices on social media sites touting the newest “hot stock,” in this case, marijuana. The aim is to stimulate interest – ad buying — in a low share and lightly traded stock that may or may not even be real. In the first phase of the scam – the “pump” – the rush of new buyers responding to the email and social campaigns pushes the stock prices up.
Then comes the “dump.” The scammers sell off those shares for a profit and disappear. With nothing to support them, the stock prices drop, those investors are left holding stocks that are suddenly worthless – and the hot commodity is now cold.
Fraud experts point out that while some scams like this are built on entirely fictitious or barely legitimate commodities, others are legitimate in their offerings, but the recruiting tactics are unscrupulous. And while federal scam busters continue to warn everyone not to open or respond to unsolicited emails, would be investors eager to make money from the next hot commodity continue to ignore that advice in numbers large enough to keep the scams going.
Online fraud experts note that not all stock opportunities advertised online are true scams – but it’s essential to take steps to protect yourself. If you learn about an investing opportunity through an unsolicited email or notice, find out more about the company. See where the stock trades, and of possible, track down information on the person doing the selling through a service like BrokerCheck. If these all check out, the stock is likely safe. But offers showing up in spam emails may not have enough details to allow for that kind of investigation.
As Jason Hartman says, income property investing is really the surest way to build wealth form investments. But for investors interested in new opportunities like marijuana stocks, it’s essential to –er, weed out the scams from legitimate offers. (Top image:Flickr/TheEquinest)
HIcken, Melanie. ‘Marijuana Stock Scams: Don’t Let Your Money Go Up In Smoke.” CNN Money. CNN.com 11 Sept 2013
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