Investing Green? Beware of Scams
Frauds are sprouting to take advantage of clean energy enthusiasts.
Jan. 19, 2010 — -- To many environmentalists and investors alike, the clean energy technology sector appears to hold great promise.
But regulators are warning individual investors to be careful of green energy investment scams that appear to be on the rise as interest in alternative energy grows thanks to high oil prices and concerns about climate change.
"It seems like everybody's going green these days -- even fraudsters," the Financial Regulatory Authority warned last week. "However, the 'green' they are after is your money."
FINRA said green energy scams "dangle the promise of large gains from investing in companies purportedly involved in developing or producing alternative, renewable or waste energy products."
There are legitimate clean energy investment options out there, but FINRA says investors enthusiastic about this sector need to do their homework.
Green energy frauds may involve classic "pump and dump" scams that tout thinly traded stocks to create an artificial demand before the perpetrators sell their shares, leaving investors with worthless stock.
Last week's Investor Alert from FINRA cited a solar-panel stock touted as "set for a 200% gain" and a Chinese wind-power company called a "one in a million" opportunity that could jump "51X its current level." FINRA did not identify the companies in question.
Other possible green-energy frauds may employ a Ponzi scheme in which incoming funds from new investors are used to pay phony returns to earlier investors.
FINRA pointed to a recent case brought by the Securities and Exchange Commission that charges promoters of "eco-friendly opportunities" with luring 300 investors into a $30 million Ponzi scheme. The SEC charges the promoters falsely told investors they would be backing a "carbon negative" housing community in rural Tennessee and in a "biochar" charcoal substitute made from organic waste, promising returns ranging from 17 percent to "hundreds of percent" annually.
Representatives of the two companies named in the SEC's civil complaint -- Mantria Corp. of Bala Cynwyd, Pa., and Speed of Wealth LLC of Centennial, Colo. -- have denied the charges.
Some signs of a possible fraud, says FINRA:
