Avoid Investment Scams on Twitter
Follow these tips to steer clear of investor fraud on Twitter and other social media.

Analysts, financial advisers and even Pimco's Bill Gross are on Twitter nowadays to dispense stock tips or offer up strategies on weighting a portfolio. According to the Securities and Exchange Commission, the financial services industry's use of social media is "rapidly accelerating." But the same things that make social media such a valuable tool for investors -- think up-to-the-minute newsflashes and direct access to financial professionals -- leave traders susceptible to market manipulations or hoaxes.
Take Our Quiz: Investor Psychology
Pump-and-dump schemes, fraudulent promotions and high-yield investment programs -- HYIPs, for short -- may predate Twitter, but two recent cases show how easily investors can fall into those traps on social media. On Jan. 29, shares of Audience Inc. (Ticker: ADNC) dropped 25% in seconds after a tweet purportedly from short-selling firm Muddy Waters warned that the audio chip maker was being investigated for fraud. Audience recovered quickly, but Nasdaq briefly shut down trading after about 300,000 shares changed hands in two minutes. The next day, someone impersonating a different short seller on Twitter accused biotech company Sarepta Therapeutics (Ticker: SRPT) of altering its drug trial results. The deceptive tweet sparked a flurry of activity where more than 700,000 shares traded in a minute and the stock briefly fell 9.9%.
The problem isn't limited to Twitter. In January 2012, the SEC charged an Illinois-based investment adviser with trying to scam potential buyers on LinkedIn and other sites with fake securities. FBI agents told Reuters in November that new technologies including social media will play an increasingly large role in financial fraud.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here are some things to keep in mind before acting on online buzz:
Assess Twitter handles. The Muddy Waters impersonator copied the firm's logo in the deceptive Twitter feed but adjusted the handle to read "@Mudd1waters" (versus the legitimate handle: @muddywatersre). The Sarepta hoax came from Twitter feed "@citreonresearc," instead of short-selling firm Citron Research's real handle, "@CitronResearch." Be wary of big-name accounts with only a handful of followers, and compare suspicious tweets to a firm's or manager's official feed to see what they normally write about.
Research all claims. Check with your state's securities regulator, FINRA's BrokerCheck or the SEC's Investment Adviser Public Disclosure to determine if brokers, advisers and investment firms are legit and in good standing.
Ignore too-good-to-be-true tweets. Question, or better yet delete, unsolicited posts or messages that tout investment opportunities with outlandish returns. An out-of-the-blue promise that you'll earn 300% a year on your money won’t materialize. If you're tempted, first compare the promised profits to returns for similar investments. An enormous gap is a red flag. Or ask an independent financial adviser to evaluate the offer.
Leave investment advice to the pros. 50 Cent may rap about getting rich or dying trying, but he's probably not the guy you want picking stocks for you. In January 2011, he promoted shares of H&H Imports to his millions of Twitter followers when it was trading at 10 cents a share. The next trading day the stock gained nearly 300% on the hype, despite the fact that H&H Imports had little revenue, mounting losses and a warning from its own auditors about its ability to continue as a going concern. The company now goes by the name As Seen on TV (Ticker: ASTV).
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
Ten Cheapest Places to Live in Texas
Property Tax Looking for a cheap place to live in Texas? Look no further. These counties have the lowest property tax bills in the Lone Star State.
-
AI Is Missing the Wisdom of Older Adults: What It Means for You
AI will increasingly affect your healthcare and finances, but young workers are primarily designing the systems and getting most of the jobs.
-
Stock Market Today: Good Feelings and Solid Data Lift Stocks
Resilience and de-escalation defined another generally positive day for financial markets.
-
Stock Market Today: Tesla Drags on Stocks Amid Musk-Trump Feud
Sentiment has soured between President Trump and his once-loyal ally, Tesla CEO Elon Musk.
-
Stock Market Today: Stocks Brush Off Weak Jobs Data
The yields on the 2-year and 10-year Treasury notes fell sharply after a pair of weak economic reports.
-
Stock Market Today: Rally Extends on Good-Enough Expectations
Fiscal policy still has markets' attention, but taxes rather than tariffs and deficits rather than inflation are participants' primary focus.
-
Stock Market Today: Markets Move With Fresh Trade War Winds
The new uncertainty is the same as the old uncertainty, which is fine with investors, traders and speculators.
-
Stock Market Today: Stocks Bounce as US-China Tensions Escalate
Stocks were volatile to end the week and the month amid concerns a trade truce between the U.S. and China is splintering.
-
Stock Market Today: Stocks Chop as Judges Block Then Reinstate Tariffs
The Trump administration has asked for and received a stay in a case that seems headed for the Supreme Court.
-
Stock Market Today: Stocks Struggle Ahead of Nvidia Earnings
The three main indexes closed lower as Wall Street awaited the AI bellwether's quarterly results.