Con Artists Using Email Blasts to “Pump and Dump” Penny Stocks

Stock Market, Wall Street, Fraud, Notorious, RiseConstantly searching for new ways to shirk the system, con artists have been resorting to mass email blasts seeking to lure gullible individuals into investing in the volatile world of penny stocks.

The Wolf of Wall Street made penny stock fraud notorious and while DiCaprio’s fictionalized Jordan Belfort scammed investors over the phone, today’s penny stock scammers now made up 16% of all of the spam email messages sent in 2013. Alarmingly, that number has risen wildly from a seemingly innocuous total of just 1% of all spam messages sent in 2012. Scammers are able to send these emails at such a prolific rate because they make use of viruses to infiltrate thousands of computers to use as a launching point for their onslaught of fraudulent emails. 

The Case of Rich Pharmaceuticals

Penny stocks, on the whole, are the perfect treasuries to defraud investors because they are seldom listed on major exchanges, and many of these upstart companies do not even file with the Securities and Exchange Commission. Biotech companies are also among the more enticing to investors seeking enormous returns by betting on “the next big thing,” so Rich Pharmaceuticals, trading on the OTC market, was a perfect storm of factors for those seeking to manipulate its price by means of a spam email campaign. After the spam emails were sent, en masse, to investors, Rich Pharmaceuticals’ stock price tripled, to nearly 37 cents per share, before scammers dumped their overvalued shares back into the market. The company, itself, is not believed to have been involved in the scheme, but the alarming stock price swing has caught the attention of regulatory commission, FINRA.

Tell-Tale Signs of Spam Emails

As a general rule of thumb, the more aggressive the tactics employed by a broker or an email chain, the greater the likelihood that fraudulent practices are at play. The emails that saw Rich Pharmaceutical shares skyrocket and fall likely contained aggressive language stressing the urgency of buying the stock NOW, based on soon-to-be-released information that would see the company’s value rise sharply.

At the end of the day, those seeking to manipulate the system will always vie to be a step ahead of the regulators, so it is crucial to act conservatively and perform thorough research on companies, especially penny stocks, before investing. When receiving emails touting “deals of the century” and wild returns within a short time-frame, it is better to be safe, than sorry.

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