On Your Side Alert: Marijuana Invest Scams
RICHMOND, VA (WWBT) - You may have noticed marijuana has been in the news a lot lately. Medical marijuana is legal in 20 states, and recreational use was recently legalized in two states. Now scammers are taking notice.
If you're looking to invest, marijuana may not be the first thing that comes to mind but crooks want to change that. Professor Cory Bunting with VCU's School of Business says pot has become the latest target for investment scams. It's called pump and dump. "A small group of individuals will accumulate shares in a very tiny company and then they will hype that company up through news releases and postings on messages boards, and ramp the stock up and then take that opportunity to cash out, leaving the unsuspecting shareholders holding the bag," Bunting explains.
These phony investment opportunities can show up in your email, through fax, texts, tweets or even commercials, Bunting says don't let the green go to your head. Instead, he says ask yourself two questions -- why would a total stranger offer you this tremendous investment opportunity and second, do you want your cash tied up in something that's still in legal limbo.
"As far as an investment standpoint, I wouldn't find it very attractive because to my knowledge, it is still illegal at the federal level and when I am looking at an investment, I don't like the idea that on any given day the Feds could come in and shut down my business," he says.
The independent agency that regulates the markets put out a warning on its site. The Financial Industry Regulatory Authority or FINRA also offers some helpful tips and a place where consumers can file a complaint. Professor Bunting says when it comes to investments, most people should seek help from a financial advisor. He says there are legitimate Marijuana Stocks out there but you really have to do you research and find the right fit. "Many of them have very limited reporting requirements, so it is very difficult for the average person to investigate these companies, find out if they are legitimate or a good investment. For the average person, even if it is not a scam, it is probably not the best thing to invest in these types of companies, Bunting says. The best advice if you get one of these offers, hit the delete button.
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