Regulators Warn Investors Not to Fall for Online Pump-and-Dump Schemes

The SEC, Securities and Exchange Commission, and FINRA, the Financial Industry Regulatory Authority Inc. warned investors yesterday that e-mail spam designed to dupe investors into “pump-and-dump” stock offerings is increasing. "Pump-and-dump" is defined as "an illegal practice in which investors attempt to artificially inflate the price of a stock by disseminating inaccurate or misleading information. These investors have a long position on the stock in question and seek to inflate the price in order to sell their shares for a higher profit. Pumping and dumping violates securities laws and can lead to hefty fines. Victims often stand to lose a good deal on pumping and dumping as the price of the stock usually falls to its previous level in a relatively short period of time."

These promoters claim to have inside information or special access to new technology or investing strategies in the hopes of luring in investors and driving up the company's stock price. They then sell the shares for a profit.

“E-mail stock spamming is back in high gear,” the regulators said in an Investor Alert, citing a recent report by McAfee, a computer security subsidiary of Intel Corp. These messages also are being sent through social media, such as Facebook and Twitter.

“Don't fall for these scams,” the alert states. “They are the 'inbox' equivalent of a boiler room sales operation, hounding investors with potentially false information about a company. Just hit the delete key.”

If you have experienced a financial loss due to a "pump-and-dump" scheme, call Soreide Law Group for a free consultation with an attorney on how to potentially recovery your investment at: 888-760-6552.