Seattle-based regulation agency Hagens Berman Sobol Shapiro introduced March 15 it had begun an investigation into SOS Ltd. (NYSE:SOS), a Chinese language crypto miner. The investigation stems from allegations made by Hindenberg Analysis, a outstanding quick vendor. The allegations have triggered SOS inventory to lose its momentum in 2021.
Like many shares InvestorPlace is protecting today, I don’t know whether or not to snicker or cry about the entire affair. It boggles my thoughts why anybody would waste their time on SOS inventory.
Completely different strokes for various people, I assume.
Usually, I don’t give credence to class-action-lawsuit factories, however years in the past, I discovered firsthand in regards to the potential for fraud by seemingly legit publicly traded corporations.
If on the finish of this text you continue to really feel like shopping for SOS inventory, knock your self out. I hope you don’t.
The Downside With SOS Inventory
With out a single web page of SOS’s paperwork filed with the Securities and Change Fee (SEC), the truth that Hindenberg alleges the corporate’s company handle is a hotel room must be the one crimson flag you must stroll away from this canine with fleas.
I do know the corporate’s based mostly in China, however its authorized workforce ought to have recommended renting a mailbox. My InvestorPlace colleague, Thomas Yeung, cuts to the chase in his March 4 article. It’s truly fairly humorous.
Even the photographs of your folks turned out to be fakes. The photographs of your Canadian crypto acquisition target, FXK Tech, had been ‘lifted off a official Chinese language mining firm referred to as RHY.’ Not less than you had the decency to take away the watermark earlier than sending them. However such hijinks nonetheless border on securities fraud.
My mother and father had been the victims of an funding supervisor turned fraudster within the Eighties. I’ve zero tolerance for any humorous enterprise in terms of public or non-public corporations.
For that reason, I would never invest in Luckin Espresso (OTCMKTS:LKNCY) no matter how enticing its debt restructuring may be. Deception of this enormity should get rid of it from additional consideration by traders.
Alas, individuals are human and can chase the dream no matter its too-good-to-be-true actuality.
A Unhealthy Journey to Africa
To shorten my story, I truly wrote about my brush with securities fraud in April 2020 whereas discussing Luckin Espresso’s predicament.
“One in every of my largest investing errors was shopping for a good quantity of shares in ACLN Restricted within the early 2000s, a Belgian-Cypriot delivery firm that shipped new and used automobiles to Africa. The expansion turned out to be monetary fiction,” I wrote on April 15, 2020.
“The Securities and Change Fee halted the stock in March 2002, submitting expenses towards the corporate and its controlling shareholders later that 12 months. I encourage you to learn the entire summary of the SEC’s submitting. It’s an eye fixed opener.”
In the event you take a look at the 5 years main as much as ACLN getting nabbed by securities regulators, revenues elevated from $36.1 million in 1996 to $168.1 million in 2000. On the identical time, its working earnings grew by 483%, from $7.5 million in 1996 to $43.7 million in 2000.
In a December 2001 class-action lawsuit filing with the Southern District of New York, you will notice that the corporate claimed to personal the Sea Atef delivery vessel when it didn’t. The lawsuit listed three different main materials falsehoods.
Veteran enterprise journalist Herb Greenberg uncovered the misdeeds in The Road.
“The reality about these statements lastly got here to gentle on Dec. 20, 2001, in an article printed by Herb Greenberg on The Road.com. In response to the questions raised in Greenberg’s article, shares of ACLN plunged 64%, falling $16.71 to shut at $9.40 per share,” the submitting said.
ACLN shares would finally lose 100% of their worth. I most likely misplaced just a few thousand on that guess.
As a lot as I didn’t need to consider Greenberg’s assertions, I knew deep down that I, and a bunch of others, had been had. It taught me that you simply all the time have choices.
The Backside Line
Nonetheless, if it had been me, I’d be more inclined, given the unsure local weather surrounding crypto miners, to spend money on the Amplify Transformational Information Sharing ETF (NYSEARCA:BLOK), which will get you RIOT and MARA and quite a lot of good corporations trying to journey blockchain applied sciences all the way in which to the financial institution.
Shopping for SOS inventory, for my part, is a mistake you would possibly dwell to remorse. Only one sucker’s opinion to a different.
On the date of publication, Will Ashworth didn’t have (both straight or not directly) any positions within the securities talked about on this article.
Will Ashworth has written about investments full-time since 2008. Publications the place he’s appeared embrace InvestorPlace, The Motley Idiot Canada, Investopedia, Kiplinger, and a number of other others in each the U.S. and Canada. He notably enjoys creating mannequin portfolios that stand the take a look at of time. He lives in Halifax, Nova Scotia. On the time of this writing Will Ashworth didn’t maintain a place in any of the aforementioned securities.