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How to protect yourself from pre-IPO scams

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Many people in New York have heard stories of individuals who bought stock early on in companies like Apple or Microsoft and made a lot of money from their early investments. Initially, putting financial resources into new technology companies may have seemed a little risky, but they paid off in the end. Many who invest are trying to find that next big thing that will enable them to make lots of money through their investment.

People need to be wary of some early investment opportunities though. While at some point people may need to take a risk to make the type of money they want to make, it is important that they are protecting themselves when they make these financial ventures.

Generally, people cannot make large amounts of money from their investments until companies make their initial public offering (IPO). However, sometimes by the time they go public with their IPO, the value of the stock is already high in anticipation. People may want to try to buy the stock before it goes public to truly maximize their profit. Unfortunately, scammers know this too and will try to exploit people with IPO scams.

What to do with an unsolicited pre-IPO purchase offer

It is important to thoroughly research any offers to buy pre-IPO stock. Even if the offer is legitimate, it has risks, but in many situations, unsolicited offers to buy pre-IPO stock are scams. There are certain steps people should take to protect themselves from these scams.

  • Be careful to not be persuaded by claims to make large returns on the stock purchase even if people claim to have pre-IPO stock from well-known companies or claim to work at a well-known firm.
  • Try to figure out why a broker would randomly reach out to you and offer you such a great deal.
  • Verify the information being provided to you. Look up the people’s names to determine if they are licensed brokers, whether they have a criminal record or whether there are stories about previous scams.
  • Get a second opinion from another broker or expert in the field.
  • Never send money directly to individuals who come to you with unsolicited offers for pre-IPO stock offerings.

It can be easy for investors in New York to be drawn to pre-IPO stock purchases that promise massive gains. However, people need to be very careful about purchasing any pre-IPO stock. There are many who do fall victim to these scams though, and they deserve to receive their money back. Experienced attorneys understand these scams and may be able to help people hold these scammers accountable.