Scam of the day – April 27, 2012 – Pre-IPO scams

April 27, 2012 Posted by Steven Weisman, Esq.

The Securities and Exchange Commission has just issued a warning to investors about scammers who are purporting to sell shares in companies such as Facebook and Twitter in advance of the Initial Public Offerings of the stock of these companies.  As with many scams, there is a small kernel of truth in that the law does provide for small legitimate offers of pre-IPO shares under very limited circumstances to accredited investors.  However the chance of your getting in on these Pre-IPO offerings for such companies are slim indeed.  In 2010 the SEC obtained a judgment against a scammer who stole millions from people by offering fake pre-IPO shares in companies such as Google and just a couple of weeks ago a similar scammer was enjoined by the SEC from perpetrating a similar scam involving Pre-IPO shares of Facebook.

TIP

Certainly be skeptical of anyone contacting you with a proposal to sell you pre-IPO shares that you receive by a fax, email, text message or tweet.  Also check out the person trying to sell you the shares.  Go to the website of the Financial Industry Regulatory Authority where you can check on the background of any broker  You can also check with the SEC’s Investment Adviser Public Disclosure website and finally you can even check the Federal Bureau of Prisons Inmate Locator to learn if the person with whom you are dealing has every served time in prison.  A little skepticism and homework and save you from losing your money to a scammer.