It seems that every time there is some sort of threat to health, welfare, or your pocketbook, the scammers show up looking for ways to trick you out of your money. The most recent threat is the Chinese coronavirus. The disease is highly contagious, kills its victims at about ten times the rate of influenza cases, and does not seem to be under control at the source in East and Central China. While this is happening, investors are smart to consider investment risks and opportunities such as whether pharmaceutical stocks could be a good choice. In the meantime beware of coronavirus investing scams.
Beware of Coronavirus Investing Scams
In this regard, CNBC reports that both the Federal Trade Commission and the Securities and Exchange Commission have put out warnings about likely coronavirus scams.
If you’ve seen research reports or promotions touting opportunities to invest with companies that are working to cure coronavirus, think twice before buying stock shares.
This advice comes from the SEC, FTC, and even the Florida Department of Agriculture after an uptick in investor scams related to the virus.
“Fraudsters often use the latest news developments to lure investors into scams,” the SEC’s office of investor education and advocacy said in a Feb. 4 email.
As the Wuhan coronavirus dominates virtually every news cycle, everyone is worried about the spread of the disease and investors are on the lookout for defensive measures to take and potential investment opportunities. This is what the scammers are trying to take advantage of.
The SEC released its warning after it became aware of “a number of Internet promotions, including on social media, claiming that the products or services of publicly traded companies can prevent, detect or cure coronavirus, and that the stock of these companies will dramatically increase in value as a result.”
Investors Need to Beware of Fraudulent “Research Reports”
Investors on the lookout for investing opportunities related to the virus outbreak and spread naturally look for useful background information to use as part of their analysis of intrinsic stock value. This is a good approach when investing in stocks. The problem is that scammers are good at hyping a stock and doing it so smoothly that they appear to be offering genuine and accurate information. What is really happening is that they are typically running pump and dump schemes, especially with OTC stocks. Anyone who got sucked into the later stages of the Bitcoin pump and dump scheme and then losing their shirt knows how this works.
How Can Investors Avoid Being Scammed?
The old saying that if something appears too good to be true it is most likely too good to be true applies first and foremost. When we give advice to new investors we typically suggest that they stick with what they know. If you have a background in medicine, biology, infectious disease, or preventive medicine, you will probably have some useful insights into this situation. And, you will also know that there is no quick cure. Companies selling face masks and cleaning solutions will see upticks in sales but it can take years to develop a vaccine, especially for a brand new virus. And, many diseases for which scientists have tried to make vaccines have resisted any such solution.
If you have the appropriate background, you can read any “research reports” and spot the ones that are fraudulent. For example, when a report states that respected medical journals are reporting certain results, they should be citing the journals and the information needed to find the reports in question. Then you can go online and find the report for yourself. Statements by researchers without results that have been published in peer-reviewed journals should also be suspect. All too often, even scientists are looking for someone to back their research and will make such statements in attempts to get funding. This does not mean that they have a cure in sight.
The bottom line is that you need to beware of coronavirus scams as this disease spreads and causes havoc on the Chinese mainland, neighboring nations, and the world.