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Investor Alert: SEC Cautions Coronavirus Investment Scams on the Rise

By George C. Miller of Shustak Reynolds & Partners, P.C. posted on Wednesday, March 25, 2020.

In February 2020, the Securities and Exchange Commission (SEC) issued an alert, cautioning investors to be wary of scams tied to the Coronavirus pandemic.  It is common for fraudsters to use the latest news developments to lure investors into scams.  Nothing has been more prevalent on the news over the past several weeks than Coronavirus/Covid-19. 

According to the alert, some of the most common scams so far involve “research reports” touting phony stock price predictions.  The SEC cautions that investments in microcap and penny stocks may be particularly vulnerable to fraudulent schemes.  It is not hard to imagine “pump and dump” promoters circulating reports describing an early stage, publicly traded pharmaceutical company touting a breakthrough Coronavirus treatment or vaccine.  In fact, the alert identified two microcap companies for whom the SEC recently suspended trading based on suspicions of phony or misleading information in the marketplace. 

The SEC suspended trading in the first company, San Diego-based Aethlon Medical, Inc. (AEMD), based in part on concerns regarding the accuracy and adequacy of information about the potential of the company’s product to treat the Coronavirus.  Trading was halted in the second company, Utah-based Eastgate Biotech Corp. (ETBI) for similar reasons. 

Only when the tide goes out do you learn who has been swimming naked.  With the market volatility and likely recession caused by the Coronavirus, this is just the tip of the iceberg. 

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. 
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. 
Partner George C. Miller can be reached in the firm’s San Diego office at (619) 696-9500. 

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