FINRA warns investing public of green energy investment scams

The Financial Industry Regulatory Authority (FINRA) issued an InvestorAlert warning investors to be wary of green energy investments thatpromise large gains from investing in companies purportedly involved indeveloping or producing alternative, renewable or waste energy products.

Thenew Investor Alert, Save Your Greenbacks—Don’t Fall for Green EnergyScams, explains how these green energy scams typically work. In someschemes, con artists are using everything from tweets and text messagesto webinars and faxes to lure investors with very aggressive,optimistic and potentially false and misleading statements that createunwarranted demand for shares of a small, thinly traded company.

Thisis a classic “pump and dump” fraud where con artists behind the schemethen sell off their shares, leaving investors with worthless stock.Fraudsters are also using green investing as a hook for Ponzi schemes,where a scammer uses incoming funds from new investors to pay purportedreturns to earlier stage investors.

"Right now there are a lotof legitimate stories in the news about green energy initiatives, andcon artists want to leverage people’s interest in green energy to makea quick buck at investors’ expense," said John Gannon, FINRA SeniorVice President for Investor Education. "There is a lot of interest incompanies that claim to provide green energy, but we issued this Alertto remind investors to be vigilant about avoiding investment scams, nomatter how they are packaged."

The Alert warns investors toignore unsolicited investment recommendations and to question thesource of investment information. Investors should also be wary ofinvestments that claim to be the next big thing and promise exponentialreturns.

For example, in one recent pump and dump scheme, asolar stock was touted as “set for a 200 percent gain,” and in anotherinstance, a fraudster suggested that stock in a company involved ingreen patents could rise 1,000 percent or more.

Another red flagfor a green scheme is a hard sell that pushes investors to go “all in”on a new investment initiative. In a recently alleged Ponzi scheme,investors were encouraged to liquidate their traditional investments,such as retirement plans stocks, bonds and mutual funds, and to borrowagainst their home or business, so that they could invest in onecompany’s “green” initiatives.

However, according to a complaintfiled in federal court, the company did not generate any income fromwhich the promised returns—ranging from 17 percent to “hundreds ofpercents” annually—could be made.

In addition to givinginvestors detailed advice on how to spot potential scams anddistinguish frauds from legitimate opportunities, the Alert also offerstips on how to make sound decisions and where to go to learn more abouta company or stock before investing in it.

FINRA, the FinancialIndustry Regulatory Authority, is the largest independent regulator forall securities firms doing business in the United States. FINRA isdedicated to investor protection and market integrity throughcomprehensive regulation.

FINRA touches virtually every aspectof the securities business – from registering and educating allindustry participants to examining securities firms; writing andenforcing rules and the federal securities laws; informing andeducating the investing public; providing trade reporting and otherindustry utilities; and administering the largest dispute resolutionforum for investors and firms.


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