Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Nigerian scam 2.0: Would you like to buy some Facebook shares?

March 18, 2011: 10:51 AM ET

The SEC today sent out an investor alert, warning the public to avoid unsolicited opportunities to "buy pre-IPO shares of Facebook, Twitter, Groupon or other popular companies." I know, I know: Zynga must be pissed to have been left out.

One would hope that such a warning would be common sense, but I'd also think that most people wouldn't wire money to the transient prince of [insert your favorite African nation here]. From the alert:

SEC staff is aware of a number of complaints and inquiries about these types of pre-IPO investment scams, which may be promoted on social media and Internet sites, by telephone, email, in person, or by other means.

In September 2010, a judgment order was entered in favor of the SEC based on allegations that a scam artist had misappropriated more than $3.7 million from 45 investors in four states by offering fake pre-IPO shares of companies, including Centerpoint, AOL/Time Warner, Inc., Google, Inc., Facebook, Inc., and Rosetta Stone, Inc.

What I find particularly interesting here is that the SEC made no attempt to separate legitimate second market buyers from the scam artists. It's not as if the Agency doesn't know the difference, given that it's opened an inquiry into the former group (which only solicits accredited investors, and which does actually buy the shares it promises to buy -- or else it returns the money).

Or maybe, just maybe, this is an indication that the SEC doesn't believe the lines of demarcation are quite so clear...

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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