According to FINRA, seizing upon investor demand for shares of the private stock of high-profile companies, the con artists behind these scams are swindling the public by peddling non-existent shares of these companies.
As FINRA’s Investor Alert Pre-IPO Offerings — These Scammers Are Not Your Friends explains, pre-IPO speculation involves buying unregistered shares in a private company before the initial public offering (IPO) of securities.
While a company can sell its unregistered shares in private transactions, these investments can be fraught with risk and are typically open to a select group of investors who meet certain income or asset thresholds.
FINRA said it recently became aware of potentially fraudulent schemes to sell purported shares of Facebook.
Additionally, the Securities and Exchange Commission recently settled a civil action against a self-employed securities trader who allegedly bilked more than 50 US and foreign investors out of more than $9.6m in a series of pre-IPO scams involving purported shares of Google, Facebook and other well-known companies.
FINRA senior vice president for Investor Education John Gannon said investors might think they are getting in on the ground floor of innovative social media companies, but instead find that they may have handed over real money for non-existent shares. Any investor who receives an unsolicited offer to invest in a pre-IPO company should walk away.
