Regulators turn up the heat on social media-linked scammers

Regulators turn up the heat on social media-linked scammers

The US Financial Inustry Regulatory Authority (Finra) has warned investors to be on their guard against social media-linked ponzi schemes, in which scam artists use YouTube, Twitter and facebook to promote high-yield investment programmes (Hyips) with the promise of unrealistically high returns.

The con artists behind Hyips are experts at using social media to lure investors and create the illusion of social consensus that these investments are legitimate, says Finra.

The agency points to the recently exposed Pathway to Prosperity scheme, which allegedly defrauded over 40,000 investors in over 120 countries of $70 million and used online forums and blogs to brag about the returns available.

Earlier this month, the Securities and Exchange Commission obtained an emergency asset freeze against a Canadian couple who fraudulently touted penny stocks through their website, facebook and Twitter.

The Federal Bureau of Investigation has reported that the number of new Hyip investigations during fiscal year 2009 increased more than 100% over fiscal year 2008.

Finra SVP John Gannon says: "Hyips are old-fashioned ponzi schemes dressed up for a Web 2.0 world. Some of these schemes encourage people to bring in new victims, while others entice investors to 'ride the ponzi' by attempting to get in and get out before the scheme collapses."

Finra has produced a guide for investors, Hyips - Hazardous to Your Investment Portfolio, which outlines the characteristics of the schemes, the steps investors can take to protect themselves and where to turn for help if they think they have been scammed.

Finra's Gannon says the agency will use Google AdWords to promote the guidance to people undertaking online searches for information on high-yield investment programmes.

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