Does this sound familiar? EXS, TAK, SRC, TK rinse & reapeatThe SEC has issued warnings to investors about pump and dump schemes and has described the pattern of such schemes as follows: First, there’s the glowing press release about a company, usually on its financial health or some new product or innovation.
Then, newsletters that purport to offer unbiased recommendations may suddenly tout the company as the latest “hot “stock. Messages in chat rooms and bulletin board postings may urge you to buy the stock quickly or to sell before the price goes down. Or you may even hear the company mentioned by a radio or TV analyst.
Unsuspecting investors then purchase the stock in droves, pumping up the price. But when the fraudsters behind the scheme sell their shares at the peak and stop hyping the stock, the price plummets, and innocent investors lose their money. Fraudsters frequently use this ploy with small, thinly traded companies because it’s easier to manipulate a stock when there’s little or no information available about the company.