Pump and dump schemes have cost investors hundreds of millions of dollars in recent years. The World English Dictionary defines as "with regard to unscrupulous stock market manipulation describes a fraudulent scheme where unscrupulous stockbrokers, analysts and shareholders for their actions is highly recommended to drive the price before selling to a rapid profit (slang). " Although the definition describes a manual system, means to describe how this isfraud in the investment market today.
An advanced communications system, these systems much easier to commit. A thief can decide in a fair, to promote the hype (), the stock and sell when prices rise, so the stock short on the way down to sell. When you need to know how the stock price will strive to be effective, he worked for the administration of the reasons that investors buy stock to sell.
Fraud is the use of a microcap stocks. MostThese shares trade on the Bulletin Board market traded (OTC BB). These thinly traded stocks to help take an initial position at a low cost, management of information on population, and achieving a significant increase in the share price for the demand of small size. Textbook approach to fraud is often the broker to tell other investors on the demand for stock and increase in price. Fraudster will then sell (dump her mother) for profit.
This system has evolvedwith boiler-driver of the market hall, where the technology of the telephone systems are starting to automated call and cost of calls at low cost. It was developed in the fax, which was popular and less expensive labor-intensive boiler rooms. When the Internet became popular, was the instrument of choice for fraud. This is the most effective way to obtain information to investors and often do not know the real identity of crook.
A real case, asfollow. A fraudster has identified a small tech company the necessary capital for its products on the market. Deceives two, an investment banker, knew that the approach of the owner of the company to raise capital. The owner agreed, and the investment banker suggested to take the company public by merging into one's hands clean public shell companies that trade on the OTC BB. Fraudster two arranged a 10 million dollar investment by a third in the new company.An initial deposit of $ 800,000 the company made with the balance due at closing. Cheat once, twice, and many others who knew about the fraud, which have positions in company stock at very low prices.
Just pump the hype began in earnest. The owner began broadcasting news of new investment in the company's website. The group of thieves who had done many times before, starting probably in the chat and company information on websites. They alsobuy shares to raise prices to encourage the accumulation of money. The stock started to $ .10, but rose to over $ 10 within weeks.
It 'time to discharge and disposal of shares by fraudsters. They not only have begun to sell their positions, but also sell the stock short, knowing that it will continue to decline. After their placements that are sold at a profit beautiful, two con man told the owner that the new investment has fallen through, and this news hit the companyWebsite and chat rooms. The stock is in free fall and the soil under its original $ 10. Of course the fraudsters to cover their short positions, make another good profit.
Do not know the owner of the fraud? No, but was invited to participate in the hype. He had lost his investment and the company went bankrupt, that rely on new investments. Of course, the new $ 10 million investment was part of the fraud. How is the group of crooks in this type of fraud? NoNobody knows for sure, but based on volume and price fluctuations, profits are estimated at one million.
Securities and Exchange Commission has issued these tips to prevent attacks on Internet stocks: Consider the source, to find out how the stock market, as an independent verification of claims, to verify the possibility to see the points of high blood pressure, and always skeptical.
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