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Tuesday, March 15, 2011

FINRA Warns of Facebook-Linked Pre-IPO Scams

It’s no secret that when a promising company emerges or an industry sector becomes “hot,” investors typically flock to get a piece of the action.

FINRA has issued a warning about scams making the rounds that purport to offer investors' access to pre-IPO shares of well-known social media companies, including Facebook.

Seizing upon investor demand for shares of the private stock of high-profile companies, the con artists behind these scams are swindling the public by peddling non-existent shares of these companies.

FINRA's Investor Alert Pre-IPO Offerings — These Scammers Are Not Your Friends explains, pre-IPO speculation involves buying unregistered shares in a private company before the initial public offering (IPO) of securities.

While a company can sell its unregistered shares in private transactions (often called "private placements"), these investments can be fraught with risk and are typically open to a select group of investors who meet certain income or asset thresholds.

View the full alert online at