RICHMOND — The days of cold-calling salesmen peddling investment products in person, by phone, or on Internet bulletin boards are quickly being replaced by “cold online networking.” As people increasingly use social networking to interact with one another, they may expose themselves to questionable investment deals.

The State Corporation Commission (SCC) warns Virginians to make sure they know with whom they are doing business when considering investment opportunities pitched through “friends” on social networking sites. “Make sure you know whether that person who has ‘friended’ you online is truly a friend or a foe before giving them your hard-earned money,” said Ron Thomas, director of the SCC’s Division of Securities and Retail Franchising. “The person behind the profile may not be who they seem. Instead, they may be deliberately mimicking your likes and interests to lure you into an unsuitable investment opportunity or outright scam.”

Targets of such affinity schemes typically include community service groups, professional associations or faith-based organizations. Scammers infiltrate groups of individuals connected through common interests, hobbies, lifestyles, professions, or faith to establish a false bond or common interest before launching the scheme.

The rise in popularity of online social networks such as Facebook, Twitter, LinkedIn, eHarmony, and other online communities has made it easier than ever for con artists to quickly establish trust and credibility. Online social networking sites enable scammers to gain access to potential victims through their online profiles. Con artists can then use this information to make highly targeted pitches to “friends” within a particular social group. “Because of the nature of social networks and their ease of accumulating a lot of friends or followers, scams can spread like wildfire,” Thomas said.

Thomas urges investors to carefully research any investment opportunity and the person and company offering it. Obtain written information that fully explains the investment before you hand over your money. Understand the investment product being offered and make sure it meets your personal investment goals.

The SCC offers an investor alert regarding social networking on its website at www.scc.virginia.gov/srf. The alert advises investors to watch for red flags common to online investment schemes such as promises of high returns with no risk, operations based offshore, and requests for payment through e-currency websites.

The alert also offers tips on how investors can protect themselves against fraud in social networking by taking the following steps: protect your personal information; search the names of all persons and companies connected to any investment being offered; obtain a prospectus; beware of testimonials from “satisfied” investors; do not take the word of a salesperson; and contact the SCC’s Division of Securities and Retail Franchising to determine if an investment and the person recommending it are properly registered.

For more information, call the Securities Division in Richmond at (804) 371-9051 or toll-free (in Virginia) at 1-800-552-7945. You may also visit the division’s website or visit the North American Securities Administrators Association’s website at www.nasaa.org.

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