After Every Natural Disaster Comes a Tidal Wave – of FraudThough it is very much like adding insult to injury, one of the more pervasive issues that crests shortly after any natural disaster is stock fraud. Perhaps hoping that consumers are distracted by their woes, or blinded by other outpourings of generosity, scam artists take these opportunities to cast a wide net, blanketing the area with schemes devised to take much-needed money out of the pockets of disaster survivors. It can be particularly challenging for survivors or victims to sort through all the offers of assistance to discern between well-intended offers and those intended to defraud, steal, or dupe.

Common types of post-disaster scams

While the communication of the scam varies—from phone calls, flyers, emails, texts, and face to face interactions—the basic premise is usually the same, and has a few typifying elements:

  • Crowdfunding opportunities or stock offers associated with clean-up or rebuilding
  • Solicitation of investment in new technologies to address current and future disaster relief efforts (including weather related schemes)
  • Unreasonable promises of growth and profit over a short time period
  • Specific funding goals or dollar amounts being raised
  • Supporting details garnered from generally reliable sources, such as news outlets
  • Name dropping of major corporations or ostentatious display of governmental affiliations
  • Normal processes of rebuilding presented as major milestones or celebrations
  • Repeated emphasis on how lower priced stocks have more room for growth and higher valued ones
  • Immediacy or time limitation for buy-in

Because many of the elements of a scam closely resemble legitimate fundraising, how can any reasonable person avoid falling for these types of fraudulent investment scams? Potential participants must do their own due diligence prior to handing over any funds, or committing to do so, particularly when the offer came in a blanket unsolicited form. For any investment or stock related offer, running the relevant broker’s information through FINRA’s BrokerCheck system is the best place to start. Beyond the individual broker, the company should have publicly-available information listed through the SEC. Any prior complaints will be noted, as well as the age of the company. Newly-made or frequently-sued companies are not wise investments. Additionally, finding out all the details of an offer is key, such as on which exchange a stock is or will be traded. If the stock is being listed on an exchange other than the most reputable ones, investors should be concerned.

The Frankowski Firm’s lawyers are here to assist if you or someone or an older loved one has lost money through inappropriate financial conduct of an investment professional. Please contact The Frankowski Firm at 888-741-7503 to discuss your potential legal remedies or complete the contact form.