Hurricane Matthew, like other disasters often give rise to investment scams. Investors and consumers could be defrauded if they don’t take certain precautions.
According the SEC, these scams can take many forms, including promoters touting companies purportedly involved in cleanup and repair efforts, trading programs that falsely guarantee high returns, and classic Ponzi schemes where new investors’ money is used to pay money promised to earlier investors.
Scams that promise fast and high profits, with little or no risk, are classic signs of fraud. Ask questions and be skeptical if you are approached by somebody touting an investment opportunity. The SEC brought a number of enforcement actions against individuals and companies who made false and misleading statements about alleged business opportunities in light of the damage caused by Hurricane Katrina in 2005.
One of the most common hurricane-related investment scams is the classic pump and dump scheme where fraudsters attempt to boost stock prices of small companies using false or greatly exaggerated statements so they can sell the shares they own at artificially high prices.
Even those who want to help hurricane victims should be wary of bogus requests for charitable donations. You may receive requests to donate to charities that simply do not exist. Be wary of unsolicited emails or solicitations on social media. Legitimate charities usually aren’t actively seeking out donations in the immediate aftermath of a disaster.