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Pump And Dump – Stock Fraud

Pump and dump is a term referred to an investment scheme which attempts to boost the price of a company’s stock through false and misleading promotions or highly exaggerated statements. As long as there have been stocks, there have been stock fraudsters who seek to inflate the price of stocks. Usually the con artist is a third party person who is not in any relation to the company about to be scammed. The only In most cases the company itself is clueless that it is part of a scam. It’s chosen because its stock is selling for pennies a share, making it easy for the scammer to acquire a huge number of shares with a minimal investment. Due to the small float of these types of stocks it does not take a lot of new buyers to push a stock higher. Often the promoters will claim to have inside information about an impending development or to use a great combination of economic and stock market indicators to pick stocks. In reality, they are only thieves who will earn a quick profit by gaining lots of investors. Once the price is high enough they sell their shares and stop inflating and promoting the stock which ultimately ends with a sharp fall in prices and thus investors lose their money. Similar but inverse scam is Short and Distort.


HOW PUMP AND DUMP SCAM WORKS

a) You need a worthless stock, with a tight float and which is thinly traded. Small companies are needed as a precondition. Tight float means that most of the stocks are held by insiders and promoters and not by the general public. The reason for this is that it is much easier to manipulate the price of the stock when there are fewer stocks held by the general public since fewer buying of stock is needed to increase the price. You now buy an otherwise worthless stock at low prices. This sets the stage for to make money when the stock price elevates.

b) You start a promotional campaign to create interest in the stock. You use advertising campaigns, cold calls, newsletters, newsgroups, message boards, chat rooms, emails, seminars and any other media to promote the stock. Information used to promote the stock is said to be a rumor, inside information or your unbeatable technical and economical analysis. Investors are being enticed with visions of making the big score, quickly and without much risk. Your promotions will make investors swim in the water of excitement. Essentially, you are playing on the investors strings of greed to try to make the investors feel that he can’t miss the next great investment play.

c) You now attempt to increase the price of a stock. The stock chosen is thinly traded, so you and insiders can quietly raise the price by buying up the stock. Instead of putting bid offers at lower prices, they take the ask bids out and go up the price ladder. Since there is little public float, it doesn’t take a lot of buying to get the price up.

d) You have increased the price of a stock and now dump it at a higher level. You leave with a high profit, while other investors face a sharp ride to the south.

REAL EXAMPLE

Click here to see a frequently updated list of spam advertised stocks

Claims being made about how a stock is set to break out based on the next greatest thing or generate returns of hundreds or thousands of percent, should be met with a considerable amount of caution. It is important to always do your own research in a stock before making an investment. Don’t listen to any financial claims made from anonymous or unknown persons!

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5 Responses to “Pump And Dump – Stock Fraud”

  1. 1
    Arjuna Unix Says:

    nice articles on your site. i like it. thanks.

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  2. 2
    samuel Says:

    This is a great article and very informative too, nice work.
    I have been a victim and I need to report the case and I wish
    you can provide me with the address and phone number where I
    can do it. hope to hear from you. thanks

  3. 3
    admin Says:

    Just navigate to the homepage and find the best suitable telephone number, email or website to report your case.

  4. 4
    GUY JOHNSON Says:

    I INVESTED OVER 30,000 IN NEWMARKET TECHNOLOGY NWMT AND LOST ALL MY MONEY NOT UNAWARE THIS COMPANY HEADED BY PHILIP VERGAS AS A BIG SCAM. I NEED YOUR HELP EXPOSING THIS CEO BEFORE MORE INVESTOR LOST ALL THEIR SAVINGS LIKE ME. THE COMPANY CONTINUE TO ISSUE FAKE AND DISCEPTIVE PRs DAILY TO LURE NEW INVESTORS. THANKS.

  5. 5
    Randall Long Says:

    last year a promoter for WBSI assured me the stock would go to .2-.3 cents and advised to but a million at .0034, so I did. After that it dropped like a rock and hasn’t came close to a penny. That was around 2-4-2012. Now I see another summer promotion and a lot of constant, hourly ups and downs. Is this another pump and dump ?? I don’t understand WBSI just announced a patent for some of there technology, so why the pump and dump ?? They still look like a good company, but with bad greedy management…

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