Friday, August 23, 2013

Marijuana Stock Scams

I have a bit of a hard time believing this is actually an issue, but according to FINRA, with medical marijuana legal in almost 20 states, and recreational use of the drug recently legalized in two states, the cannabis business has been getting a lot of attention—including the attention of scammers.

The potential for marijuana stock scams is certainly present, but the potential huge payday that is involved in these stock scams is not there - I cannot imagine anyone pitching a huge score in a company that produces a product that people have been growing and "processing" in their own homes for decades.

However, FINRA is concerns, and believes that the scammers will be out, with  pitches to invest in potentially fraudulent marijuana-related companies by faxes, email or text message invitations to webinars, infomercials, tweets or blog posts.

FINRA claims that one company promoted its move into the medical cannabis space by issuing more than 30 press releases during the first half of 2013. These releases publicized rosy financial prospects and the growth potential of the medical marijuana market. The company was also touted on the Internet through the use of sponsored links, investment profiles and spam email, including one promotional piece claiming the stock "could double its price SOON" and another asserting the stock was "poised to light up the charts!" Yet the company's balance sheet showed only losses, and the company stated elsewhere that it was only beginning to formulate a business plan.

The lesson of course is to avoid these pitches. Take a moment to read FINRA's release, which has some tips on how to avoid a scam - Investor Alert - Marijuana Stock Scams - FINRA