News Column

Sandy Aftermath Generates a Severe Scam Warning

Nov. 2, 2012

Christine Dugas, USA TODAY

Investment scams and charity fraud crop up after every disaster. But Hurricane Sandy is the first U.S. catastrophe in the social-media age.

"We are in uncharted territory," says Andrew Stoltmann, a Chicago securities attorney. "And social media has expanded the tentacles of scamsters exponentially."

A decade ago, fraudsters had to rely on phone calls for their high-pressure sales pitches. Then they could use e-mail. Now social media adds an entirely new weapon to their arsenal.

When a natural disaster like Hurricane Sandy occurs, there is an outpouring of generosity from Americans who want to help. And they become easily vulnerable to fraud.

The latest outgrowth of social media is crowdsourced funding, or crowdfunding, which is a way to pool small donations on the Internet from large amounts of investors -- or people who want to support causes. It was approved by the JOBS Act, which was passed this year. Crowdfunding can't be used until next year for investments. But it can be used now for charities -- and, therefore, by scam artists.

Experts say this is one area to be approached with extra care. The North American Securities Administrators Association calls crowdfunding and Internet offers a top emerging investor threat. "You can't look in the eyes of the person that is on the other end of the computer," says Heath Abshure, NASAA president and Arkansas Securities commissioner.

You also may receive a Twitter or Facebook post from someone who claims to be a storm victim and asks you to send them money.

"But because of the nature of social media, there is really no way to ensure that the person making the posting is in the United States, much less a storm victim," Abshure says.

If you receive a cold call, text or tweet, the best advice is to do your research. Charities are generally regulated by consumer protection laws and administered by the state attorney general. "In Arkansas, charities looking to raise money in the state have to be registered," Abshure says.

To help avoid online scams, Apple and Red Cross have joined to offer a safe system for donating. Consumers can sign into their iTunes account and click on "Donate."

Source: (c) Copyright 2012 USA TODAY, a division of Gannett Co. Inc.

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