In response to the COVID-19 pandemic, the North America Securities Administrators Association (NASAA) put together a task force in April 2020 specifically targeted to use “online investigative techniques to identify websites and social media posts that may be offering or promoting fraudulent offerings, investment frauds, or improper unregistered regulated activities” which were related to any aspect of COVID-19. The purpose of the task force was to “detect, disrupt and deter” any purported investment scams related to COVID-19, as NASAA was concerned that “con artists have long followed the headlines to use current events to give their schemes an air of legitimacy” and that the “COVID-19 pandemic is no exception”.
Since April 2020, the task force has disrupted 220 fraudulent schemes related to COVID-19, with the coordinated effort involving over 100 investigators from 44 jurisdictions in the United States, Canada and Mexico. In total, the task force has identified 244 fraudulent schemes, 154 of which were investment-related. The President of NASAA, Christopher Gerold (who is also the Chief of the New Jersey Securities Bureau) indicated that the investigations are to put “con artists on notice that state and provincial regulators are taking swift and effective actions to protect investors from their schemes”. Despite their efforts, the task force continues to be concerned that the worst is yet to come, as additional investment scams may arise as medical and therapeutic advances are announced concerning possible vaccines for the coronavirus.
NASAA reminds investors that some common characteristics of fraudulent offerings are:
- They promote safety amid uncertainty;
- They prey on fear and anxiety;
- Involve cryptocurrencies or cryptocurrency-related investment products, foreign exchange (forex); products unfamiliar to inexperienced retail investors;
- Refer to returns as “passive income” or “cash flow” promising monthly payments to appeal to cash-strapped investors.
NASAA reports that much of the fraudulent activity discovered to date has occurred online. Computer forensics specialists on the task force have identified more than 200,000 virus-related internet domain names, most of which were created in February 2020 or later. NASAA encourages all investors to stay vigilant regarding these fraudulent schemes. The full report from the NASAA website can be found here .
©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume X, Number 239
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