Facebook Trading Scams Increasing: Regulator

NEW YORK (TheStreet) -- Facebook investment scams are proliferating on the Web and investors should be on the lookout, the securities industry's main self-policing organization warned on Tuesday.

Financial Industry Regulatory Authority (FINRA) warned in a a statement that con-artists have been pitching fake investments in Facebook and other "well-known social media companies." The scams usually take the form of "pre-IPOs", or the sale of unregistered shares in a private company to an investor prior to the initial public offering.

The release notes the Securities and Exchange Commission recently settled a civil action against one trader "who allegedly bilked more than 50 U.S. and foreign investors out of more than $9.6 million in a series of pre-IPO scams involving purported shares of Facebook, Google(GOOG) and other well-known companies."

Among the tips FINRA is disseminating to the public, the release urges investors to ask themselves "why would a total stranger tell me about a really great investment opportunity?'"

The warning comes as Wall Street firms like JPMorgan Chase(JPM) and Goldman Sachs(GS) have climbed aboard a mini-Gold Rush in hot, privately-traded social media companies.

-- Written by Dan Freed in New York.

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