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Medical Marijuana Stock Scam Warning — for Real

Jon C. Ogg

It appears that scam artists are now targeting medical marijuana and legalized marijuana schemes to part you from your money. As the business opportunities are rising around the new and controversial field of legalized marijuana, so are the number of scams. The Financial Industry Regulatory Authority, known as FINRA in the financial industry, has issued a new investor alert targeting Marijuana Stock Scams. FINRA is warning investors about potential related scams and we are surprised that the same warning is not being sent out by the U.S. Securities and Exchange Commission.

The FINA data confirmed that medical marijuana is legal in almost 20 states, and is now recreationally legal in two states, garnering much attention to the cannabis industry. FINRA warns:

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Like many investment scams, pitches for marijuana stocks may arrive in a variety of ways -- from faxes to email or text message invitations, to webinars, infomercials, tweets or blog posts. ... The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success. The scammers behind these "pump and dump" scams can then sell off their shares, leaving investors with worthless stock.

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Here is the shocking part of what the regulatory agency is touting. These legalized marijuana scams are actually no different than any of the other scams that has proliferated around the internet and bilked millions and millions of dollars from unsuspecting investors. FINRA talked about heavily touted and thinly traded stocks with suspicion, but this is really the same sort of scam that anyone should be on the lookout for regardless of the industry. We have seen this same sort of pattern for anything hot that can be touted with great claims: biotech, cancer, colored diamonds, gold, nutritional goods, off-label drug use, oil and gas finds, rare earth materials, silver, 3D printing, and on and on. It seems likely to expect that down the road there will be investor scam warnings about the colonization of Mars and asteroid harvesting in space.

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FINRA is telling investors to use FINRA BrokerCheck to see if a promoter is registered as a broker-dealer and to check out the Securities and Exchange Commission EDGAR database of company filings to learn about companies. FINRA gave an example as well:

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One company highlighted in Marijuana Stock Scams was touted on the Internet through the use of sponsored links, investment profiles and spam email, including one promotional piece claiming the stock "could double its price SOON." Yet the company's balance sheet showed only losses, and the company stated elsewhere that it was only beginning to formulate a business plan.

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Sometimes financial news is even crazier than the news flow around celebrities.

Here is the full lengthy report detailing the ways to spot a potential scam.

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