Do not become a victim to a con artist’s stock market publicity.

Also known as “hype and dump manipulation,” pump and dump schemes happen on a daily basis.  The way it works is this.  Crooked individuals will go around the internet and make posts on message boards or blogs promoting a company’s stock.  That stock is usually an obscure stock.  It is unfortunate for many innocent investors that a lot of interest is put into a stock due to the false posts all over the internet.  Once the price of the stock goes up, or is “pumped up,” the perpetrators of this scam quickly sell off the stock and make a huge profit before the stock settles back to its normal price.  Those who bought the stock at its highest price lose out on a lot of money.  Back in the late 90’s, pump and dump schemes were everywhere especially in the form of spam e-mail.  People dreaming of getting rich quick fell victim to this kind of fraud.

Not only is the internet a good place for perpetrators to initiate the pump and dump scam, but also telemarketing was another perfect method for them.  Sometimes, telemarketers will call you and utilize the same techniques they used on the internet.  They will make claims about “insider” trading knowledge on a particular stock that does not seems to fail and that you need to “take action” right away or you will miss the “opportunity of a lifetime.”  These calls may be originating from company promoters who are being paid to make these calls.  These are the same people who will skip town after the stock price is “pumped” by their false trading tips.

How to Avoid Pump and Dump Money Making Schemes

Try to avoid purchasing stocks solely based on tips from insiders especially if they are initiating the phone call on you.  Also ignore any anonymous posts you see on the internet.  It is perhaps that the person promoting a stock has no clue what they are talking about.  It is most likely an intentional attempt to jack up the price of a stock with no solid basis.  It is best to do your own research on a stock.

There are lots of investment fraud schemes out there such as the pump and dump scam.  It is up to you to educate yourself to recognize what is and is not legitimate.  By doing so, you can minimize becoming a victim to the crime of investment fraud.