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Utah official warns: Be wary of medical marijuana stock scams

Published February 20, 2014 1:04 pm

Scams • Securities division has tips to stay away from fraudsters.
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

The Utah Division of Securities is warning you to not get high on someone else's supply.

The division is asking Utah investors to be wary of investment pitches that may use medical marijuana businesses in other states as the basis for stock tips.

"Before you jump into an investment promising high returns on medical marijuana, check out the sources selling it with the Division of Securities, "Francine A. Giani, executive director of the Utah Department of Commerce, said in a statement, "If you rush into marijuana-related stocks without doing your homework, your savings may go up in smoke."

Officials said that scammers may use social media, faxes, emails, Facebook postings, Twitter postings, seminars and infomercials to peddle false information about medical marijuana stocks.

The White House recently announced that federal banking institutions will accept payments from medical marijuana dispensaries now that more than 20 states have legalized the use of medical marijuana.

The division warns that fraudsters might ensnare victims with "pump and dump" schemes in which they create demand for shares in a worthless company then "dump" the stock after it peaks.

Officials recommend these tips to help avoid being scammed:

Why me • Be wary if a stranger comes to you with "a really great opportunity." If it sounds too good to be true, it is.

Consider the source • Be skeptical about companies that make exaggerated claims and issue a barrage of press releases and promotions in a short period of time that pump up the company.

Research • Contact the division to learn more about the company and if it has had any prior disciplinary actions. Also search the Internet for any stories about its history.

SEC filings • Check to see if the public company has any filings with the Securities and Exchange Commission and read them to verify any information about them.

Changes • Be wary if the company makes frequent changes to its name or business focus because "name changes and the potential for manipulation often go hand in hand," according to the division.

vince@sltrib.com

Twitter: @ohmytech