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Microcap, nanocap and penny stocks are very popular investments. They’re affordable and although risky, can provide a nice payout. Unfortunately, they’re also popular vehicles for investment fraud.

Accurate information on microcap stocks can be hard to find. Scammers may use this opportunity to flood the market with false or misleading information.  Here are some popular examples of how scammers spread false information on these stocks and lure potential investors:

Press releases

Just because a press release is found on a legitimate or trusted financial site doesn’t mean it has been vetted or is accurate.Press releases may contain false or exaggerated information about a company’s sales, revenue projects, acquisitions and more.

Internet Fraud

On-line bulletin boards and chat rooms are popular with fraudsters who can easily hide their identity or claim to be someone else.  If someone is heavily promoting a particular micro or penny stock or claiming inside information, be sure to investigate on your own. This is a red flag for an investment fraud scheme.

Email spam 

Watch out for unsolicited emails with hot tips or press releases. The email may contain a link to what appears to be a legitimate site but is actually a cleverly disguised fake.

Cold calls and “Wrong Numbers” 

Telemarketing is still popular with swindlers.  One favorite scam is the “wrong number.” Be wary if you receive a call that appears to be an inside tip intended for someone else.  Another variation of the “wrong number” cold call includes the scammer leaving a phone number potential investors can use to confirm the “accuracy” of the tip.  While the number may reach what sounds like a legitimate office, it’s actually part of the scam.

Be wary if you receive a call that appears to be an inside tip intended for someone else.  Another variation of the “wrong number” cold call includes the scammer leaving a phone number potential investors can use to confirm the “accuracy” of the tip.  While the number may reach what sounds like a legitimate office, it’s actually part of the scam.

How Can I Find Information on Microcap Stocks?
If you’re interested in a microcap stock it’s best to do your own research.  Here are just a few suggestions from the Securities and Exchange Commission (SEC) on where to search for information:

Get information directly the company rather than relying on press releases and unsolicited information.  Carefully review the documents including the fine print and all disclaimers.

Contact the SEC’s EDGAR database

Contact your state securities regulator

Contact the Secretary of State where the company is incorporated

Being aware of a scammer’s tactics can help you protect your investments.  There are a number of investment fraud schemes to take advantage of your will to invest. If you feel that you have been a victim of an investment scam, securities fraud or broker misconduct please call our Securities Law Firm today at 313-962-7777 for a FREE case evaluation.