SEC: Watch Out for Hurricane Ida Related Investment Scams

 

The Securities and Exchange Commission (SEC) has issued a warning about fraud associated with Hurricane Ida, which wreaked havoc in numerous states last week with torrential rain and tornadoes, leaving millions without power. 

The SEC's Office of Investor Education and Advocacy releases investor alerts regularly to caution investors about the latest investment frauds and scams. Fraudsters would most likely target people who may receive compensation from insurance companies in the form of huge payouts as a direct result of Hurricane Ida's destruction. 

The SEC explained, “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." 

AccuWeather CEO, Dr Joel Myers calculated that Hurricane Ida caused almost $95 billion in total damage and economic loss. Millions of individuals will now have to deal with insurance companies to cover the cost of water damage and other difficulties caused by the hurricane's aftermath. 

The SEC added that following the devastation by Hurricane Katrina in 2005, they were compelled to take action against hundreds of false and misleading statements concerning alleged business prospects.

Precautionary Measures

In the context of mitigating the risk and preventive measures, SEC urged, "Be sceptical 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." 

"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." 

This advisory follows the one issued by the FBI's New Orleans office, which warned the public about an elevated risk of scammers attempting to profit from the natural calamity. 

"Unfortunately, hurricane or natural disaster damage often provides opportunities for criminals to scam storm victims and those who are assisting victims with recovery," the FBI warned. 

The FBI also offered a list of safeguards that victims of natural disasters should follow to avoid getting scammed, including: 
  • Unsolicited (spam) emails should be ignored. 
  • Be cautious of anyone posing as government officials and requesting money via email. 
  • Clicking on links in unsolicited emails is not a fine decision. 
  • Only open attachments from known senders; be wary of emails purporting to have photos in attached files, as the files may contain viruses. 
  • Do not give out personal or financial information to anybody asking for donations; doing so might jeopardize your identity and leave you vulnerable to identity theft. 
  • Be vigilant of emails purporting to provide employment. 
  • Before transferring money to a potential landlord, do your research on the advertisement.