The fact someone is using social media for fraudulent purposes is hardly new, but the use of the LinkedIn platform, which has so far seemed a secure environment for business, does not bode well.
In fact, the entire incident is going to cast a pall over the use of social media by any financial folks, which have already expressed their reluctance to enter the fray at all.
Of course, with responsible financial professionals not using social media they leave the field open for less responsible financial professionals to move in.
It doesn't seem logical to me to blame LinkedIn for how it was used. This is tantamount to suing Stanley if someone uses one of their hammers to commit a crime. Social media is a tool. How it is used is left up to the user. If the social media service is aware of the fraud being committed and does nothing, then they become culpable. Otherwise, they are merely a vehicle for communication.
There is also something to be said for the people who bought these fraudulent securities. I don't know about you, but I am very careful about who I give my money to, regardless of how good the deal may sound. That's why I haven't sent any money to Nigeria, despite repeated warnings I was going to lose my "lottery winnings."
For now, most communication via LinkedIn, Facebook, Google+ and Twitter is unregulated. It is easy enough for someone to create a fake profile, list a plethora of bogus background information and/or pretend to be someone else. Therefore it is the responsibility of the users to police themselves.
If you are dealing reputably on social media be certain your background information is correct, your profile is complete and you provide as much real-world contact information as you possibly can. No doubt any potential clients or customers will want to verify you are who you say you are and that you can do what you say you can do before they do business with you.
Everything else about making deals via social media comes down to the use of common sense. Remember: If it sounds too good to be true, it probably is.
Last week’s SEC accusation of Anthony Fields’ marketing fraudulent securities on LinkedIn surfaces the dangerous side of social media’s growing prominence in the private financial markets. The accusation indicates that Anthony Fields used LinkedIn and other social media networking websites to lure investors by offering more than $500 billion in fake securities. The SEC said Fields provided false and misleading information about clients, assets under management, and even the history of his firm's business. Fields held himself out as a broker-dealer even though he never properly registered with the SEC, the agency said.
Click here to read more about Fields' activities.