Posted On: August 25, 2011

Financial Industry Regulatory Authority Alerts Investors About Gold Stock Scams

FINRA has put out an alert warning investors about financial scams touting gold stocks. The name of the investor alert is "Gold" Stocks—Some Investments Mine Your Pocketbook. The caution comes as the cost of bullion reaches level highs and the increase in the number of websites, blogs, Tweets, and YouTube videos about investing in gold.

How to Detect a “Gold” Stock Scam
Unfortunately, some of these “golden” opportunities and stocks that are being marketed don’t have a lot of value or may be scams. Gold-related investment scams usually involve exploration companies’ and/or gold mining companies’ stock with a value that is usually based on gold reserves are challenging to accurately assess. Some statements made by stock promoters are purposely misleading.

FINRA's warning signs of a possible “gold” stock scam:

• Predictions/price targets of rapid and exponential growth.
• Claims of being a “buyout target” for mining companies.
• Claims that stock performance is related to the rise in the price of gold.
• Warnings of an economic meltdown or inflation.
• A revision to the company’s trading symbol or name so that it is more closely linked with gold.
• Claims that making money by investing in gold is easy.
• Use of news headlines about gold.
• Use of the names of major investment institutions or major investors in order to appear more credible.
• Statements about how much easier for lower priced stocks, as opposed to their higher-priced counterparts, to rise in value.
• Pressure that you in invest right away.

FINRA also says to watch out for “free lunch” programs offering to give you information about investing in gold. It was just last year that the Securities and Exchange Commission charged six people with running a $300 million Ponzi scam involving “gold” investments that defrauded over 3,000 investors in the US and Canada. The fraudsters claimed they represented an independent financial education company that had found a way to make up to 36% yearly returns by getting involved in gold mining investments.

In fact, the financial scammers were investing in shell companies that were owned by two of the men. Investors’ money was moved through different accounts in Europe, Asia, and South America and then used to pay investors their “interest,” fund a few companies that were not profitable, and enrich the fraudsters. Merendon Mining Corp. Ltd. is the name of the supposedly successful gold mining and refining company that was supposed to give investors their profits.

Earlier this year, the Commodity Futures Trading Commission took three separate actions against precious metal companies accused of financial scams involving different precious metal investments. In one alleged financial scheme, a boiler room telemarketing company allegedly defrauded investors of over $23 million.

If you lost money from investing in “gold” opportunities, contact our stockbroker fraud law firm immediately.

"Gold" Stocks—Some Investments Mine Your Pocketbook, FINRA

SEC Charges Perpetrators of $300 Million Ponzi Scheme Involving Purported Gold Mining Investments, SEC, June 10, 2010

CFTC Charges Florida Firm, American Precious Metals, LLC, and Principals, Sammy J. Goldman and Harry Robert Tanner, Jr., with Fraud, CFTC, May 17, 2011

Precious Metal Financing Agreement Scams, Fraud Guides


More Blog Posts:

Commodity Options Fraud Charges by CFTC Prompts District Court to Freeze Assets and Records of 20/20 Trading Co. Inc. & 20/20 Precious Metals Inc., Stockbroker Fraud Blog, May 6, 2011

FBI Investigates Former HFI Securities Inc. Vice President After Gold and Silver Coins Worth Millions of Dollars Found in His Basement, Stockbroker Fraud Blog, September 29, 2008

SEC and FINRA Alerts Retail Investors About Structured Notes with Principal Protection, Stockbroker Fraud Blog, May 30, 2011