U.S. securities regulators are warning investors about pump and dump stock scams involving so-called nutraceuticals, such as energy drinks.
The Financial Industry Regulatory Authority issued a new investor alert Wednesday warning investors about stock scams related to companies selling nutraceuticals, which are products that claim to help people to lose weight, get an energy boost, live longer or fight colds.
While some nutraceutical companies are legitimate, FINRA warns that con artists may try to lure in investors with false and misleading information designed to create unwarranted demand for shares of small, thinly-traded companies that often have no history of financial success. They can then sell off their shares, leaving investors with worthless stock.
The alert warns investors to ignore unsolicited investment recommendations and to question the source of investment information. Investors should also be wary of investments that promise fantastic growth and check out the person promoting the stock or investment, it says.
“While nutraceuticals claim to help people become healthy, investing in some of the companies associated with these products can make investors’ portfolios sick,” said Gerri Walsh, FINRA’s vice president for investor education.