How to Prevent becoming a victim of a Social Media Scam 

According to Investment News this week, the potential misuse of social media smart phone applications (apps)  is a cause for concern for regulators and investors. With so many relying on mobile apps in every aspect of life, there is a higher risk of unscrupulous financial advisors or brokers defrauding investors through their social media apps. 

There are two possible ways that bad brokers may take advantage of the investors through social media apps, according to the article. First is the advisor who uses mobile apps to defraud clients or investors; second is the unregistered financial advisor, who attempts to sell products and services that may not be in a client’s best interest. 

In one example, the SEC charged an investment advisor with fraud alleging he used the social media app Twitter to make thousands of recommendations, to “his numerous followers to buy stocks in which {he} had secretly amassed holdings.” 

According to the SEC, the alleged scheme was a classic pump and dump, and the advisor purportedly gained thousands of dollars in profit at the expense of his Twitter followers, according to the Justice Department. He eventually pled guilty to one count of securities fraud. 

“Playing” the stock market became quite popular with millennials during the Covid-19 pandemic, and many younger investors are looking for information on stock picks on social media apps such as YouTube and Redditt, leading to many opportunities for investment scammers, according to the article.  TikTok, Instagram and Twitter are also ranked among the top five social media sources where young people receive financial information, according to the article. 

Another issue that is popping up — “influencers” on social media apps are pretending to have credentials of registered investment advisors and brokers, according to an alert issued by the SEC in the summer of 2021. 

The Financial Industry Regulatory Authority (FINRA), the self-regulator that oversees brokers and brokerage firms, has also recently raised concerns in a report on exam priorities, that mobile apps can benefit investors, but they also raise “novel questions and potential concerns.” 

According to Investment News, there are four ways to avoid being ripped off by a social media scam. 

• Run away from any social media pitches to buy cryptocurrencies. 
• Verify any financial advisor on social media is legitimate. (You can check them out at FINRA BrokerCheck.) 
• Hard assets like gold need to held in custody by a legitimate institution. 
• Check with a CPA or CFP before investing. 

Free Consultation with a Securities Attorney 

The foregoing information, which is all publicly available, is being provided by The White Law Group.    

If you have suffered investment losses and would like to speak with a national securities attorney regarding your recovery options, please call the White Law Group at 888-637-5510 for a free consultation.    

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to the representation of investors in FINRA arbitration claims against brokerage firms throughout the United States.   

The White Law Group’s FINRA arbitration attorneys have handled over 700 FINRA arbitration claims involving unauthorized trading, unsuitable investments, fraud, negligence, churning/excessive trading, and improper use of margin.  To learn more about a recent claim filed by the firm, please see:

The White Law Group Files Lawsuit against Essex and Infinex

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