Marijuana Investments Attracting Scam Artists

When a growing industry gets a lot of ink, there are always plenty of crooks eager to make the wealth of naive investors sink.

The growth in legal pot is no exception, the Financial Industry Regulatory Authority (FINRA) warned today in an alert about marijuana stock scams.

Noting 20 states have approved medical marijuana and two are allowing recreational use, FINRA said fraudsters are trying to piggyback on the publicity to offer the unwary chances to ride the trend into financial oblivion.

“The offers almost always contain hallmarks of "pump and dump’ ploys,” FINRA warned. “Specifically, fraudsters lure investors with aggressive, optimistic—and potentially false and misleading—statements or information designed to create unwarranted demand for shares of a small, thinly traded company with little or no history of financial success (the pump). Once share prices and volumes reach a peak, the cons behind the scam sell off their shares at a profit, leaving investors with worthless stock (the dump).”

As an example of how unreputable marijuana stock scamsters can be, FINRA pointed to the case  of one thinly traded, yet heavily touted, company that purports to be in the medical marijuana business that hides the fact that its CEO spent nine years in prison for operating one of the largest drug smuggling operations in U.S. history.

FINRA said investors can avoid the traps by taking the usual recommended due diligence and by following the dicta that if an investment sounds too good to be true, it probably is.

Source:  Ted Knutson, Financial Advisor magazine

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

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