The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to help educate investors, including individuals who may receive lump sum payouts from insurance companies and others as a result of damage from Hurricane Ida, about investment scams.
Hurricanes, floods, oil spills, and other disasters often give rise to investment scams. 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.
Some scams may be promoted through email and social media posts promising high returns for small, thinly-traded companies that supposedly will reap huge profits from recovery and cleanup efforts. For example, 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 damage caused by Hurricane Katrina in 2005. Some of those cases involved pump-and-dump scams where fraudsters used bogus “news” to pump up the stock price of small companies so they could sell their own shares at artificially high prices. Fraudsters also may target individuals receiving compensation from insurance companies.
Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams related to Hurricane Ida.
Be Skeptical and Ask Questions
One of the best ways to avoid investment fraud is to ask questions. Be skeptical if you are approached by somebody touting an investment opportunity. Ask that person whether he or she is licensed and whether the investment they are promoting is registered with the SEC or with a state. Check out their answers with an unbiased source, such as the SEC or your state securities regulator. Know that promises of fast and high profits, with little or no risk, are classic signs of fraud. Read our short publication Ask Questions before making any investment.
Take a close look at your entire financial situation before making any investment decision, especially if you are a recipient of a lump sum payment. Remember, your payment may have to last you and your family for a long time. Below is a list of online resources that may help.
- Lump Sum Payouts: For information about investing wisely after receiving a lump sum payout, see Lump Sum Payouts: Questions You Should Ask Yourself before You Invest a Dime.
- Community-based Financial Scams: For information about investment scams targeting particular groups, see our Affinity Fraud webpage on Investor.gov.
- Ponzi Schemes: For information about Ponzi schemes, see our Ponzi Schemes webpage on Investor.gov.
- Saving and Investing Basics: For general information about saving and investing, see Saving and Investing: a Roadmap to Your Financial Security through Saving and Investing. This publication is also available in Spanish.
- Ask Questions: For a list of questions you should ask when considering an investment, see Ask Questions: Questions You Should Ask about Your Investments. This publication is also available in Spanish.
- Learn more tips on investing wisely and avoiding fraud at Investor.gov.