Informed Investor: Social Media
Educational materials provided by the Indiana Secretary of State and Indiana Investment Watch.
Published on: Mar 3, 2016
Transcripts - Informed Investor: Social Media
Are you an informed investor?
I n d i a n a S e c u r i t i e s D i v i s i o n
Where are social networks?
A social network is a group of individuals (or
organizations) who are connected through
common interests, hobbies, lifestyles, relationships,
faith or other beliefs. Websites such as Facebook,
Twitter, LinkedIn, eHarmony and other online social
networks and communities have made it faster
and easier for users to meet, interact and establish
connections with other users anywhere in the
Offline, social networking involves making these
connections through membership in community
service organizations, professional associations,
faith-based organizations, multi-level marketing
opportunities and singles groups, among others.
While social networking helps connect people with
others who share similar interests or views, con
artists infiltrate these social networks looking for
victims. By joining and actively participating in a
social network or community, the con artist builds
credibility and gains the trust of other members of
How do con artists exploit social
In traditional social networks, con artists use the
weekly or monthly meetings to establish strong
bonds through face-to-face contact and sharing of
personal interests and lifestyles.
In online social networks, a con artist can establish
this trust and credibility more quickly. The scammer
has immediate access to potential victims through
their online profiles, which may contain sensitive
personal information such as their dates or places
of birth, phone numbers, home addresses, religious
and political views, employment histories, and even
The con artist takes advantage of how easily people
share background and personal information online
and uses it to make a skillful and highly targeted
pitch. The scam can spread rapidly through a social
network as the con artist gains access to the friends
and colleagues of the initial target.
Before investing through a social network, ask yourself these questions:
• Have I verified that the promoter is legitimate?
• Do I understand the risks of the investment?
To learn more or for help with other investment products, contact:
Indiana Securities Division
302 W. Washington St., Room E-111, Indianapolis, IN 46204
www.IndianaInvestmentWatch.com | 1-800-223-8791
For more investor resources, contact NASAA:
Phone: 202-737-0900 | Fax: 202-783-3571 | Web: www.nasaa.org
T h e N o r t h A m e r i c a n S e c u r i t i e s A d m i n i s t r a t o r s A s s o c i a t i o n
What are the red flags of an
online investment scam?
Online investment fraud has many of the same
characteristics as offline investment fraud. Learn to
recognize these red flags:
• Promises of high returns with no risk. Many
online scams promise unreasonably high short-term
profits. Guarantees of returns around 2 percent a
day, 14 percent a week or 40 percent a month are
too good to be true. Remember that risk and reward
• Offshore operations. Many scams are
headquartered offshore making it more difficult
for regulators to shut down the scam and recover
• E-Currency sites. If you have to open an e-currency
account to transfer money, use caution. These sites
may not be regulated, and the con artists use them
to cover up the money trail.
• Recruit your friends. Most cons will offer bonuses if
you recruit your friends into the scheme.
• Professional websites with little to no
information. These days anyone can put up a
website. Scam sites may look professional, but they
offer little to no information about the company’s
management, location or details about the
• No written information. Online scam promoters
often fail to provide a prospectus or other form
of written information detailing the risks of the
investment and procedures to get your money out.
Before you invest
Evaluate every investment opportunity
in the virtual world the same way you
would in the real world.
Visit the NASAA website www.nasaa.org for
more tips on recognizing, avoiding and reporting
How can I protect myself from
fraud in social networking?
• Contact the Indiana Securities Division.
Before investing any money, contact your state
securities regulator to learn more about the
background of the salesperson and registration
status of the investment. Contact the Indiana
Securities Division at 1-800-223-8791 or visit www.
• Protect your personal information. Many sites
will allow you to choose how much personal
information you want to make publicly accessible,
and how much you want to keep private. Adjust
your privacy and security settings accordingly, and
think twice before posting personal information
• Search the names of all persons and companies
connected to the investment being offered.
The Internet offers anonymity and scam artists
take advantage of this. Do a search for the name
of the person offering you the investment and the
companies involved in the investment. If there are
few results, or their name doesn’t appear anywhere
outside of the one investment program they’re
offering you, that’s a red-flag that they may be
using multiple aliases, or hiding behind a fake
• Beware of the use of names or testimonials from
other group members. Scam artists frequently
pay out high returns to early investors using money
from later arrivals. This type of scam is a Ponzi
scheme. Fraud aimed at groups of people who
share similar interests is called affinity fraud.
• Obtain a prospectus. Ask for written
documentation that details the risks of the
investment and procedures to get your money out.
• Do not take the word of a salesperson. Don’t feel
pressured to“act now”. Take time to
check out the investment yourself,
and remember the old adage:“If
it sounds too good to be true, it