Securities: Pump and Dump Schemes Target Investors

As you have gone through your e-mail, you may have seen a message that suggests purchasing a obscure stock with the promise of high returns. This may be another “pump-and-dump” scheme, as they are becoming increasingly prevalent on the internet. According to Peter Cassidy with the Anti-Phishing Working Group, even computers with good anti-spam filters may be receiving multiple “pump-and-dump” e-mails daily. In November, the NASD warned investors to be aware of spam that appears to be a personal message sent to the wrong person.

Beware "Pump-and-Dump" Stock Schemes Posing as Personal E-mail

The friendly message typically contains a stock tip. Pump-and-dump schemes begin with scammers purchasing stocks at low price and then sending thousands of e-mail messages playing up the company’s future. When people begin to purchase the stock, the price of the stock rises. The scammers then drop their shares and collect the profit. Internet security experts report that internet stock spam has grown over 14 percent in the past two years and will most likely continue to increase.