finra

FINRA

For Release:
Contacts:

Wednesday, May 4, 2011
Nancy Condon (202) 728-8379
George Smaragdis (202) 728-8988

 

 

FINRA Alert Warns of Japan Earthquake Related Investment Scams

 

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) issued an Investor Alert today warning investors of investment scams centered on Japan's recent earthquake and nuclear crisis. The con artists behind these "pump and dump" scams seek to capitalize on the media spotlight on Japan's recent disasters by linking a company's products or services to efforts ranging from the detection of gamma rays and the clean-up of nuclear waste to the development of earthquake-resistant structures.

FINRA's new Investor Alert, Investment Scams Follow in the Wake of the Crisis in Japan, details how some of these schemes are perpetrated. Essentially, con artists lure investors with very aggressive, optimistic and potentially false and misleading statements or press releases that create unwarranted demand for shares of some small, thinly traded company. Once new investors drive up the cost of the company's shares, the con artists behind the scam quickly sell off their shares, leaving investors with worthless stock. 

In the weeks since the Japanese earthquake, FINRA has detected a number of circumstances that should make investors very wary about investing in a company that claims to offer solutions to Japan's recent disasters. FINRA has seen numerous suspicious claims, for example:

  • A company issued a press release touting a "new generation" of radiation detectors from a company that, according to public documents, is in weak financial condition and has no manufacturing capabilities.
  • A company claimed to have developed a new technology to clean up radioactive waste which is "very likely to cause a huge boost to immediate-term gain possibilities."
  • A company, less than three weeks after the Japanese disaster, began promoting the development of an "earthquake resistant building," despite the fact that the company's building design had only been tested once on a "shaker-table" designed to simulate earthquakes.

"Unfortunately, a nation's tragedy is being used as a just another pretext to part investors from their savings," said John Gannon, FINRA Senior Vice President for Investor Education. "As we saw with Hurricane Katrina and the Gulf Oil Spill, disasters provide a perfect opportunity for the unscrupulous to steal money from the unwary."

"FINRA's Office of Fraud Detection and Market Intelligence is on heightened alert when natural disasters occur and actively monitors for potential fraudulent investment schemes. Unfortunately, natural disasters are opportunities for ruthless perpetrators to concoct get-rich-quick schemes leveraging the media attention paid to rescue and relief efforts. FINRA works with our regulatory partners to ensure that these schemes are identified and confronted quickly," said Cameron K. Funkhouser, Executive Vice President and Head of FINRA's Office of Fraud Detection and Market Intelligence.

The Alert warns investors to ignore unsolicited investment recommendations and to question the source of investment information. Investors should also be wary of investments that promise fantastic growth or claim connections to the federal or foreign governments or well-known corporations. Investment Scams Follow in the Wake of the Crisis in Japan also includes a list of "rip-off tip-offs" and information on where to go to learn more about a company or stock before investing in it.

FINRA is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit www.finra.org.