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Stock scammers are using the coronavirus outbreak to dupe investors, SEC warns

February 6, 2020, 8:01 PM UTC

As coronavirus takes its toll on the economy by grounding flights and closing casinos, stock market scammers may be looking for a way to make a quick buck.

“We have become aware of a number of Internet promotions, including on social media, claiming that the products or services of publicly-traded companies can prevent, detect, or cure coronavirus, and that the stock of these companies will dramatically increase in value as a result,” the SEC warned Tuesday. “We urge investors to be wary of these promotions.”

The SEC declined to name specific companies, though coronavirus news has had effects on some health industry stocks. 

These alerts come as the virus continues its global march. On Wednesday, the U.S. Center for Disease Control and Prevention confirmed the 12th case stateside, while the most recent estimates say the coronavirus has killed 563 people and infected 28,000 in China, and spread to 24 other countries. No vaccine has yet been identified.

Not the first time

It wouldn’t be the first time that scammers saw an opportunity to exploit investors amid a global health crisis. During the Ebola outbreak of 2014, U.S. regulators warned investors against stock scams involving the deadly virus. In particular, the SEC urged investors to be on their guard when microcap companies claim they are developing products to prevent or treat Ebola. At the time, the SEC suspended trading of four companies that touted their Ebola-related services, citing a lack of publicly available information: Bravo Enterprises, Immunotech Laboratories, Myriad Interactive Media, and Wholehealth Products.

In general, the SEC has warned investors to tread carefully through over-the-counter micro-cap markets. Such listed companies are subject to looser reporting rules, and their share prices are more susceptible to, for example, pump-and-dump schemes—allowing outsiders to spread misinformation to boost a stock price, before selling rapidly to net a quick profit.

It’s not the only example of misinformation, which has been rampant through the coronavirus outbreak. Scammers have sent phishing emails claiming to have preventative information on the virus.

Online, claims that garlic, sesame oil, or vitamin C can cure or prevent coronavirus have also made the rounds as World Health Organization specialists chase down and refute them as they surface. Facebook, Google, and Twitter are also working to combat false information on the disease.

With the contagion still far from peaking, the likeliness of future coronavirus scams grows.

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