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Katrina Stock Scam
Financial fraudsters are already hitting investors with post-Hurricane Katrina stock scams tied to speculation about spiking energy prices
Financial fraudsters are already hitting investors with post-Hurricane Katrina stock scams tied to speculation about spiking energy prices, U.S. market regulators warned on Wednesday.
After catastrophes like Katrina, fraudsters often rush to repackage old schemes around the latest sensational headlines, said the U.S. Securities and Exchange Commission.
"Already we are seeing e-mails touting stocks on the basis of hurricane activity in the Gulf (of Mexico)," said Susan Wyderko, director of the SEC's Office of Investor Education.
"Unfortunately, disasters always bring out scammers who prey on human suffering," she said in an interview.
One spam e-mail making the rounds on the Internet refers to "a spate of refinery glitches and an unusually active hurricane season" and says investors could more than double their money in just days on certain penny stocks, the SEC said.
"This one is certainly worth watching All Week!! You may want to act very early tomorrow morning," the pitch says.
Scams like this often target the elderly and can spread quickly via email, junk fax and through boiler room schemes
using telephone cold-call lists, the SEC said.
"We often see opportunistic pitches like this following disasters," Wyderko said.
After the attacks of September 11, 2001, the SEC accused Texon Energy Corp. of soliciting elderly people to invest in an oil and gas Ponzi scheme
by telling them Texon would profit from rising energy prices due to the war on terrorism.
Texon sold unregistered stock to investors and fraudulently promised them "an annual 12-percent 'dividend' derived from Texon's oil and gas profits," the SEC said.
"Instead, Texon paid investors the so-called 'dividend' with money raised from other investors," the SEC said.
A 2002 court judgment ordered Texon to repay $1.2 million in ill-gotten gains after a settlement agreement with the SEC.
On Wednesday, benchmark oil prices eased from record highs above $70 per barrel after the United States offered to loan crude oil to replace output lost to Katrina.
But energy experts, warning of a supply shock on the scale of the 1970s, said a two-year bull run that took oil to $70.85 on Tuesday may not have run its course.
Katrina, one of the most powerful hurricanes in U.S. history, forced operators to close more than a tenth of the country's refining capacity and a quarter of its crude oil output, spurring a spike in gasoline and heating oil prices.
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