Natural disasters often bring out the best in people, with many quick to donate money, supplies or labor to help strangers affected by wildfires, hurricanes, floods, earthquakes and other calamities. Unfortunately, these disasters can bring out the worst in others, some of whom seek to exploit the situation to commit financial fraud.

You might see posts on social media or receive phone calls, emails or messages, in the form of texts or from messaging apps, promoting investments that benefit from a disaster-related opportunity. Scams might include stocks associated with cleanup or rebuilding efforts or breakthroughs in science and technology that purport to address current and future disaster-avoidance strategies. While it’s possible that some of the claims being made are true, others could be false assertions promoting scams.

Spotting Potential Disaster-Related Investment Scams

Unsolicited communications about investments that exploit a natural disaster frequently include:

• price targets or predictions of quick and substantial profits;
• the use of facts from respected news sources to bolster claims of a price run-up—for example, that some percentage of the billions of dollars it will take to rebuild after a disaster will contribute directly to a company's bottom line;
• mention of contracts or affiliations with federal government agencies or large, well-known companies;
• standard corporate developments, like contracting with a supplier, presented as major events;
• statements claiming that it’s much easier for low-priced stocks to soar in value compared with higher-priced stocks; and
• pressure to invest immediately.

How to Protect Yourself From Disaster-Related Scams

To avoid potential scams, make sure you get the information you need to make an informed investment choice.

• Investigate before you invest. Never rely solely on information you receive in an unsolicited message from someone promoting a stock. Use FINRA BrokerCheck to check an individual’s registration status and learn additional information about investment professionals and firms.
• Find out who sent the message. Many companies and individuals who encourage stock investments are corporate insiders or are paid to promote the stock. Look for statements that indicate someone is being compensated for disseminating this information. Check the fine print for this type of detail.
• Find out where the stock trades. Most unsolicited stock recommendations involve stocks that can't meet the listing requirements of the Nasdaq Stock Market, the New York Stock Exchange or other U.S. exchanges. Instead, these stocks tend to be quoted on an over-the-counter (OTC) quotation platform where regulatory disclosure requirements are often lower.
• Read the company's SEC filings. Most public companies file reports with the SEC. Check the SEC's EDGAR database to find out whether the company files with the SEC. Read the reports and verify any information you’ve heard about the company. But remember, the fact that a company has registered its securities or has filed reports with the SEC doesn't necessarily mean that the company will be a good investment.

If you're suspicious about an offer regarding a disaster-related investment, you can file a complaint with FINRA, contact FEMA’s Investigations and Inspections Division or file a complaint with the Department of Justice’s National Center for Disaster Fraud.