Beware of weed stock scams

Published on January 13, 2021 by David Wylie

The Alberta Securities Commission (ASC) has released its list of the top investment risks and possible scams to look out for in 2021. And as far as investment risks are concerned, cannabis is not exempt.

Financial scams come in all forms. For example, pump and dump schemes.

It’s important to take the steps necessary to ensure an investment is right for you… and to get informed about how to protect yourself from scam artists.

“We want to empower and inform Albertans to make the right investment choices for them and to protect themselves from fraudsters who are constantly looking for ways to prey on people’s vulnerabilities,” said Hilary McMeekin, Director, Communications and Investor Education. “This list will arm Albertans with timely information to stay vigilant and protect their finances as we enter 2021.”

According to the commission, its list is based on investor complaints, ongoing investigations and current enforcement trends.

Excitement around new and emerging industries is particularly risky to those who would invest in weed.

Don’t miss out on this opportunity!

The ASC warns that scam artists will often build investment schemes around the latest trends, capitalizing on the hype and investor excitement.

“There is limited information and history available around these emerging industries, making it easier to promote the investment and spread false information. The ASC has seen similar scams, misconduct and tactics with industries such as cannabis and foreign exchange where fraudsters provided misleading or false information, over-promoting the company’s value, deals and/or future expectations. As with any investment, it is important to research a new industry and understand the risks associated with the business before investing your hard-earned money,” it says.

Three tips

  1. Beware the promise of high returns resulting from a proposed deal involving a letter of intent.
  2. Watch out for those introduced by someone they know – like family members, friends or co-workers.
  3. COVID-19 has severely impacted people’s employment and livelihoods. That means scam artists are preying on people’s fears by using fraudulent ads that promote opportunities to work from home as day traders in the financial markets.

“Fraudsters will often target ethnic communities, religious organizations, social clubs or professional groups, taking advantage of the trust and relationships that exist within,” says the ASC.

“The fraudster becomes part of – or pretends to be part of – the community, flaunting their success or wealth and often enlisting unsuspecting ambassadors to spread the scheme to make it seem credible. Friends and family may unknowingly fall victim and encourage others to invest, too. When it comes to your money, the best decisions are informed ones. You should always err on the side of caution, do your own research and check the registration of anyone selling an opportunity before giving away your money.”

Overall, watch out for red flags and use your common sense. Check things out with credible sources.