Pandemic-related financial frauds on the rise, ASC warns

The Alberta Securities Commission is warning Albertans to be wary of Covid-19-related financial frauds.

According to the regulator, pandemic-related scams became an issue last year and continue to represent one of the biggest risks to investors in 2021. Investors are being warned to be particularly watchful for “pump-and-dump” schemes, which promise an opportunity to invest in new products or services that will prevent, detect or cure COVID-19 or otherwise aid in the fight against the pandemic. These types of schemes usually involve artificially inflating the price of a penny stock shell company through issuing false and misleading positive statements.

“We know already that historically, fraudsters like to take advantage of global events like this. They create a shell company and start promoting it with the promise of significant returns,” said ASC spokeswoman Hilary Mcmeekin. “Just be wary of these things. Absolutely, there are legitimate companies out there trying to grow and looking for investment and we want to support that. But the message to investors is to do your research before you jump in.”

Last August, the ASC issued a notice of hearing against Vancouver-based Roadman Investments Corp. and its CEO, Luke Montaine, alleging that misleading statements were made by the company that it was involved in research and development in preventing the spread of coronaviruses. The allegations against Roadman and Montaine have yet to be proven.

In addition, the ASC has also seen a rise in potentially fraudulent ads by companies offering opportunities to work from home as traders in the financial markets during the COVID-19 pandemic. Mcmeekin said it is believed the fraudsters are trying to prey on individuals who are looking for alternative sources of income due to layoffs or requirements to stay home during the COVID-19 crisis.

“Scam artists love to prey on our vulnerabilities,” Mcmeekin said.

While the ads typically claim that applicants will be trained on trading stocks for a fee, and that no experience or licence is needed, Mcmeekin said the firms offering these services are often not legitimate and exist only to steal your money.

She said Albertans should be aware that trading on the stock exchange is inherently high-risk and complicated, and that individuals need to be registered to trade securities.

In addition to pandemic-related frauds, the ASC said it is also seeing a rise in scams related to new and growing industries, such as cannabis. Mcmeekin said with limited information and history available around emerging industries, it is easier for fraudsters to promote the investment and spread false information.

The ASC is encouraging Albertans to watch out for the red flags of fraud and report any concerns to its public inquiries office.