'There is no cure:' Watchdog warns investors about coronavirus investing scams

Yahoo Finance Canada
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Canada’s securities watchdog is warning investors to be wary of shady investment opportunities related to the coronavirus pandemic.

“Be cautious of any claims that a company has a solution to help stop the coronavirus outbreak,” said The Canadian Securities Administrators (CSA) in a release.

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“At this time, there is no vaccine or any natural health product that is authorized to treat or protect against COVID-19,”

A number of publicly traded companies, like Pfizer (PFE) and Gilead (GILD), are working on treatments for COVID-19. Gilead’s stock price even jumped while the broad markets sold off, over a vaccine it is working on.

CSA says a common form of fraud involves pump-and-dump schemes. Fraudsters lure investors by setting up shell companies and spreading false news to pump up their penny stock prices.

“The false information may spread, for example, through hyped-up news releases, social media or paid promotional campaigns through other individuals, companies or websites,” said CSA.

“The more investors that purchase the stock, the more inflated or ‘pumped up’ the price of the stock becomes.”

The fraudsters then dump their stock just before the truth comes out and the hype fades, leaving their victims holding basically worthless shares.

CSA says it’s already aware of cases and wants investors to carefully research companies before making decisions. It’s also urging Canadians to be wary when approached about investment opportunities.

“Investors contacted by anyone with warnings about their investments or finances should never give out any personal information, and contact their investment adviser or bank separately after independently verifying the phone number to ensure the caller is legitimate,” said CSA.

If you are approached by fraudsters, CSA is asking you to contact your local provincial regulator.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.

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