Source: Times Staff Wednesday, January 14, 2015

Persistent investor rip-offs such as pyramid, Ponzi and real estate schemes will be joined in 2015 by such emerging threats as fraudulent pitches to invest in the marijuana industry and more arcane scams involving digital currency and binary options.

So warns the Florida Office of Financial Regulation, the state’s financial watchdog. The agency touched on the old and new investor threats in a “Fast Facts” publication issued Wednesday in conjunction with the information from the North American Securities Administrators Association.

While many investors have at least a passing awareness of classic Ponzi schemes, the state regulators suggest fraudsters are putting fresh spins on tried-and-true investor cons.

At the top of the “emerging threat” list: investing in the fast emerging but volatile marijuana industry. Florida voters last fall rejected a medical marijuana measure. But medical marijuana is legal in 23 states, and recreational use is legal in four states and the District of Columbia. The industry’s rapid rise has prompted a sharp uptick in investor pitches to “get in early” by buying shares in marijuana-related companies.

Last May, the Securities and Exchange Commission issued an alert and accompanying trading suspensions for numerous companies that claim their operations relate to the marijuana industry. This month the Financial Industry Regulatory Authority, better known as FINRA, warned investors about the potential for fraud in this arena and the risks of investing in any thinly traded companies about which little is known.

Among other emerging threats cited by Florida regulators:

Stream-of-income investments: Investors seeking monthly returns are being enticed to invest by companies that introduce investors to individuals selling a stream of income, such as pension payments or government disability payments. A key concern is that veterans and disabled persons often are preyed upon to assign their benefits when they experience financially stressful times, selling their much needed future benefit payments at a significant reduction.

Digital currency and cybersecurity risks: The popularity of Bitcoin as digital currency sparked a rapid increase in price that attracted public interest and media attention, creating a fresh market for securities offerings tied to digital currencies. Unscrupulous promoters may be attempting to capitalize on this popularity by illegally offering securities tied to digital currencies, regulators warn. Adding to the risks: Cybersecurity problems, highlighted in 2014 when Mt. Gox, once the world’s largest Bitcoin exchange, filed for bankruptcy amid reports that hackers may have stolen around 850,000 bitcoins worth as much as $500 million.

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