Posted 5 months ago on July 1, 2013, 1:56 a.m. EST by venlean19
This content is user submitted and not an official statement
“Pump and dump” is back! The old boiler-room scam of pitching nearly worthless “penny” stocks for a quick profit (for the brokers) has make a comeback, not that anyone missed it.
Like most quick-profit swindles, pump and dump relies upon the buyers thinking that the sellers have special inside information. They need to 1) act now and 2) buy no-name stocks that have a scintillating potential for huge profits.
In the past, pump and dump relied upon unsavory teams of brokers manning phone banks to lure suckers into their schemes. But in the Internet age, there are so many more ways to reach people through email, social media and phones, that the boiler-room guys have to be pleased as punch with the new opportunities to scam a whole new generation.
Now that these swindlers have new cyber-tools to spam your email box and other access points, they are back in business in full force. According to FINRA, the self-regulator of the securities industry, a new wave of pump and dump operations is “back in high gear.”
This is what FINRA said in a recentInvestor Alert: “The latest McAfee Threats Report confirms a steep rise in spam email linked to bogus “pump-and-dump” stock schemes designed to trick unsuspecting investors. For years, fraudsters have used large-scale email pushes (what most of us call junk email, or spam) to lure potential victims into investment scams. Many of these emails tout a company’s stock—typically small, so-called “microcap” companies—through false and misleading statements to the marketplace.
These false claims could also be made on social media such as Facebook FB +0.89% and Twitter, as well as on bulletin boards and chat room pages. Often the promoters will claim to have “inside” information about an impending development, or to use an “infallible” system that uses a combination of economic and stock market data to pick stocks. Some purport to allow investors to capitalize on a new technology, strike it rich in an emerging economy, or market-time their way to huge profits. Subject lines and short messages are designed to quickly pique interest and lure investors into buying the stock—all with the goal of creating a run-up in price.
In reality, the fraudsters sending these emails are often paid promoters or company insiders who stand to gain by selling their shares after the stock price is “pumped” up by the buying frenzy that they create through the mass email push. Once these fraudsters “dump” their shares by selling them and stop hyping the stock, the price typically falls dramatically—and investors lose their money or are left with worthless, or near worthless, stock.”
The best way to avoid getting stung by these flim-flams? If something looks like spam and is too good to be true, route it to your spam can. That’s where it belongs.
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