Beware Scammers Offering Shares in Facebook, Government Warns
The scams are popping up, in various forms, across YouTube and the blogosphere. But they all follow the same general formula: visitors are offered the chance to invest in Facebook and other social media companies before they go public by giving some of their cash to rogue companies. While some pre-IPO offerings may be legitimate, the U.S. Financial Industry Regulatory Authority (FINRA) is urging investors to exercise caution.
"Investors need to understand that it's extremely rare and extremely unlikely that the average Main Street investor will have access to these kinds of shares in social media companies, before those companies go public, if they ever go public," said Gerri Walsh, vice-president for investor education at the FINRA. Walsh added that many con artists lure investors into their webs by offering what she calls "phantom riches" -- guaranteed returns, in exchange for investing in a company early on.
If you're still intent on investing in the social media industry, FINRA recommends that you investigate the opportunity beforehand. You should first verify that the person offering the investment is licensed to do so, and make sure that he or she isn't listed on the Federal Bureau of Prisons Inmate Locator. Even if the agent checks out, it's still a good idea to get a second opinion from an investment professional or lawyer.