The U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy on Monday issued an alert warning investors about scams that spring up in connection with natural disasters, such as the recent historic rain and flooding in Louisiana.
“Hurricanes, floods, oil spills, and other disasters often give rise to investment scams,” the SEC says in a statement. The statement notes that the SEC brought a number of enforcement actions against individuals and companies that made false and misleading statements about alleged business opportunities in the wake of Hurricane Katrina.
“Some of those cases involved pump-and-dump scams where fraudsters use fake ‘news’ to pump up the stock price of small companies so they can sell shares they own at artificially high prices,” the SEC adds.
Additionally, the SEC reports that fraudsters may also target individuals receiving compensation from insurance companies.
“Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams related to the recent historic rainfall and flooding,” the SEC notes.