Pump and Dump: Investing in Nothing
The Wolf of Wall Street’s main character made a fortune trading garbage stock. These are quite attractive cheap shares because one can purchase and sell them at a quick rate and make a good profit. However, most of the time only the scammers benefit.
This begins with an e-mail. Hey buddy, I won’t waste your time. I have a 100% proven intel – the stock of company ABC will skyrocket in a couple of days. My cousin who works at the law firm said that there will be a $1.5 billion deal signed pretty soon. It is a done deal, buy now!
You’re reaching for your wallet, but you are not that easily tricked. You look at the company’s stock prices over the last several weeks… hmm, one month ago, they were sold at $2.6… now they have lost half of the value, but if you purchase one thousand at today’s $1.2, then when they are back at $2.6, you will make… and if the price raises even higher…
Your head is spinning the numbers and of course you buy. Where do you think this stock is in a week? You are correct! …….. At zero.
Pump and Dump is a popular illegal technique. Scammers advise people to purchase low liquid, garbage stock and promise its growth based on insider information.
As soon as there are a high number of buys in the market, scammers dump their shares at the highest artificially induced price.
Using fake insider information is not always punishable by law. However, those who want quick money will be punished by investing in nothing.
