The business and finance articles are filled with the information about the penny stocks, as one of the most popular investments. Penny stocks are traded with a relatively thin price (usually 5$-10$. The problem of the penny stocks is that they often become the targets of manipulators running a risk of such microcap stock fraud as pump and dump. This form of the fraud is about inflation the price through false statements which allow selling the stock for the higher price. Today it is much easier for fraudsters to cheat, as the Internet offers an easier way for pulling the fast ones.
How does it work?
Those who are interested in a stock market research have already heard about this unimaginative but very tricky scheme. Some scam companies buy stocks, which are not in the high demand, spending on them very little money. Then they start sending emails that contain the idea that penny stocks are a great money investment. To these letters they usually add fake business stories which play the part of some kind of advertisement. They tell about the establishing of the gold stock company describing what a great profit it is. In fact, such companies do very well when their trusting preys start buying the stocks wasting a huge sum of money.
How not to become a victim?
- Do not trust unfamiliar companies, especially if you cannot find out any information about them in the Internet. Even if it sounds like a profitable investment, it will bring you nothing but a disappointment.
- Find where these stocks come from. Thinly traded stocks only appear on the bulletin boards, which are the least reliable of all.
- Look for more information on their site to find out about the company that started motivating you to buy the stocks from them. Check whether there have ever been any complaints, and how long the company exists.
- Use your skepticism. The propositions will definitely sound too tempting, but it is worth thinking it over to realize that there are no easy ways for making money.
Some sources offer to use this scheme as a way for making money, which not only criminal but very risky, as this fraud has been attracting attention of the law-enforcement agencies for a long time.