Avoid financial losses by learning the basics of the common pump and dump scheme.
What is Pump And Dump?
Unscrupulous investors heavily promote a stock they plan to temporarily hold until the stock price is artificially boosted/inflated through false promotion, misleading or exaggerated statements. Once the stock reaches an exaggerated or overvalued price, the original “pumpers” or scammers quickly dump it. The initial investors enjoy the inflated short-term gain, while the remaining unsuspecting investors are left with worthless stock.
Pump and dump schemes are illegal, but that doesn’t stop abusers from taking the risks.
Pump and dumps schemes can be started by anyone including a savvy single investor, a group of individuals or an unscrupulous broker. Even large brokerage firms have been caught participating pump and dump schemes.
Red Flags and Signs of a scheme
-the stock is promoted as a “hot tip,” “the next big thing” or other unverifiable statements
-the promoter claims to have inside information
-individuals are pushed to “buy now”
-the products are typically small or micro-cap stocks and traded over the counter. These stocks are often seen as affordable by the average investor and often easy for investment scammers to manipulate.
-valid information on the company, stock or products is hard to find or verify
the product/stock is heavily promoted through a variety of unsolicited means (emails, voice mails, message boards, fake press releases, “wrong numbers” promoting a “hot tip” as well as a massive increases in a stock price in a short amount of time. One example, included a stock that rose from $.30 to almost $1.00 (a 200 % increase) in just one week. Also, that the trading volume increased from an average of less than 250,000 shares before the scam to nearly one million shares.
For information on how to protect yourself against Investment Schemes and Losses visit our Blog
If you believe you have been a victim of securities or investment fraud, please contact our Michigan securities law firm today 313-334-7767. We have helped countless individuals recover from investment losses. Call today for your free case evaluation.
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