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Investors Beware of Pre-IPO Fraud, Warns SEC

The Securities and Exchange Commission (SEC) recently posted an alert on its website which warns investors about scams that offer shares of popular tech companies, like Facebook and Twitter, that have not yet been released to the public. According to investment fraud lawyers, while some pre-IPO shares offerings are legitimate, and are not uncommon, they are typically limited only to sophisticated investors.

Investors Beware of pre-IPO fraud, Warns SEC

According to the SEC, the U.S. security regulator is “aware of a number of complaints and inquiries about these types of frauds, which may be promoted on social media and Internet sites, by telephone, email, in person or by other means.” In recent years, pre-IPO schemes have been a cause for concern, according to the SEC. According to securities arbitration lawyers, investors may be tempted by offerings that capitalize on the popularity of media sites like Facebook.

An order in a bid to stop allegedly fraudulent securities sales of an investment vehicle was issued by the U.S. District Court for the Southern District of Florida in Miami in early April 2012. The investment vehicle claimed to hold pre-IPO shares of Facebook.

Only weeks prior to the SEC’s warning, President Barack Obama signed into a law bill that will make it easier for firms to solicit investors and raise capital. The bill has been harshly criticized by industry watchdogs and some SEC officials for relaxing shields that protect unsophisticated investors from fraud. Originally represented as a job-creation bill, the law makes the soliciting of private investors easier for companies. It also makes the filing requirements for initial public offerings more relaxed and allows crowdfunding for startup companies, according to investment fraud lawyers.

If you believe you have been the victim of pre-IPO fraud, find out more about your legal rights and options by contacting a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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