Last month, the Financial Industry Regulatory Authority (FINRA) issued an Investor Alert, “Nutraceutical Stock Scams — Don’t Supplement Your Portfolio with These Companies.” The purpose of the alert is to warn investors to beware of stock scams related to nutraceuticals. Stock fraud lawyers are aware of these scams and say that pitches for these types of stocks can be received in many ways, including email, cold calls, blogs, tweets and message board posts.
Products that claim to assist in weight loss, provide an energy boost or help people live longer are nutraceuticals. These products can include food and drink products that contain additives that are allegedly beneficial for health and dietary supplements. Investment fraud lawyers say that while there are legitimate nutraceutical companies, many are illegitimate and could be targeting investors for fraud.
According to FINRA, “The con artists behind nutraceutical stock scams may try to lure investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly-traded companies that often have little or no history of financial success.”
Stock fraud lawyers call this type of scam a “pump and dump” scam, in which the fraudsters sell off their shares and investors are left with stock that is worthless.
In one case of a nutraceutical stock scam, the company claimed that it had acquired the rights to medicines that treated a wide range of maladies. These medicines were promoted as “all-natural” medicines and treated everything from colds to kidney disease. The company further claimed that it could “potentially generate $100,000,000 in revenues” and could possibly “capture 3 percent of the U.S. market within a 3-year period.” However, if investors had looked at the unaudited financials of the company, they would have seen that the company had no track record of sales and almost no cash.
If you believe you have been the victim of a nutraceutical stock scam, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.