The “Pump and Dump” Scheme

In last weeks blog, “The Stockbroker Scam That Almost Got My Mother!”, I mentioned the “pump and dump” scheme. A pump and dump scam usually happens with penny stock trades. A stock that sells for pennies is purchased and hyped by a “research” firm. When the price goes up from the fraudulent hyping, the originator of the scam sells their stock. When they dump, the stock price takes a dive and the scammed investors lose their money. [1] .As the stockbroker industry’s most popular movie, “Boiler Room” shows how a company in the 80’s used the telephone to artificially pump the prices of company owned stocks and then dump the shares the company previously held, defrauding their clients of millions of dollars. And now there is the Internet to help promote these schemes.

Usually, the stock promoter claims to have inside information through emails, chat rooms or newsletters. They claim they are making unbiased recommendations and then advertise the company’s stocks as the “hot stocks”. They claim you must get in on this deal quickly before the price skyrockets and you miss out. (If you ever receive advertisements like this, see your favorite Tampa lawyer.) Unwitting investors then purchase the stock, creating an artificial demand and inflating the price. This “real” rise in prices can give validity to the stock promoter’s sales pitch but, when those behind the scheme sell their shares and quit promoting the stock, prices plummet, and you are left holding shares that are worth significantly less than what you paid for them!

As an ongoing series, I intend to address many popular stock broker ripoff schemes. The key is this, if you are interested in investing in Tampa, seek out a Tampa lawyer with the experience to review the company you are considering working with and have that lawyer review all contract proposals before you sign anything! Look for a Tampa lawyer with a proven track record in securities arbitration and securities litigation. Look for S. David Anton of Anton Legal Group.

S. David Anton is a member of Public Investors Arbitration Bar Association (PIABA) the preeminent national wide organization of attorneys who represent brokerage firm customers in disputes with the industry.  He is also a Certified Securities Arbitrator with the Financial Industry Regulatory Authority (FINRA), formerly NASD and resolves disputes between investors and stockbrokers, investment advisors and their firms. He has been practicing law since 1985 and representing brokerage firm customers since 1999.  He is a Tampa, Florida based attorney who can handle securities arbitration anywhere in the U.S.