All you want to know but never asked about the stocks and options markets.

jueves, 11 de septiembre de 2014

Typical frauds stock market

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Fax or email solicitations that tell about a particular stock

The fraud works like this: you receive a fax or an email describing a stock, giving the symbol and some details about the company. This fax or email is sent to many people, with the intention that they buy the stock given the impact that the fax created for the stock. What is really happening is that the fax you received came from a penny stock promoter, which was paid by the company (on company shares) to promote the stock.

The day the fax or email is sent, the company and the promoter are the ones selling worthless stock to unsuspecting people who received the fax or email. The promoters made ​​a fortune while individuals lose all the money they invested. This is because once the impact dies, there is no one to buy the stock and the price collapses. This scam is often referred to as the "pump and dump." The company creators and promoters raise the price and after create interest they sell the shares to all buyers. 

An alternate version of this scam works like this: you receive a message on your machine happens to be the "Wrong number". The sender acts as if leaving a message on the machine for his friend, giving details of an stock that another friend, a stockbroker, has recommended. Then the sender ask "his friend" to keep the secret, because the stockk will increase in price very soon. This fraud has been used several times, and has the same effect as the "pump and dump."

You should never buy a stock based on an email, a fax, or voicemail. In these cases the stock never produce money, because the fraud makes sure that only those involved earn money and the others lose money. If you are not in the stock from the beginning, is certainly that you are going to lose your money.


You have received a newsletter item promoting a particular stock in a hot industry? The problem is that these newsletters are actually paid advertisements by a promoter, and often exaggerate or manipulate the truth. You must be careful when you receive a newsletter that promotes a stock. Do not believe in the possibility that the stock will go up, and control your greed and the possibility of tripling your money, because that will not happen.

Shell companies 

These are companies that have no real business, but still their shares are traded in the pink sheets or the OTCBB.

The press release 

The penny stocks are very dependent on press releases to keep interest in their stocks. If the company does not release press releases often, investors forget the stock and the price go down.  If after some time after the press releases the stock has not come to life, probably you are in the middle of a fraud. Before buying a penny stock, try to find what press releases have been published and verify that a press release has produced results. Ask your broker any news and do your own research.

Exploration and mining companies

They are companies that say they are exploring mines with the prospects of finding gold, diamonds or other gems and precious metals. Some say they are digging oil. The statement is that once they find what they are looking for, the stock will go up. In other words, these companies try to create expectations for their stocks promising something that surely will not happen.

A film production company

The "company" tells the investor that it is raising capital to produce a high quality film, with actors who are willing to sacrifice their high salaries usually for art's sake.

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