How the scam works:
(with video below) Similar to the Wrong Number Voicemail Scam, this fraudulent activity comes your way advising on buying stocks from a certain company. The email claims to be from an acquaintance who mistakenly sent the message to the wrong person. Lucky you, it's in your inbox now.
After trying to get the recipient's trust by using phrases such as “we have to talk about this in person” or “timing is impeccable”, the scammer proceeds to give the name of the 'wonder' company right before the end of the messagge.
Below is an actual email our Scam Detector team received recently. Be aware that soon it might come in your inbox, too. It looks like this:
I got your voicemail yesterday about the stock tip you want, sorry I couldn't pick up the phone I was on with the wife you know how she is but please next time don't call the house line, I would prefer if you come in to my office instead. In person is always better. Anyway your timing is impeccable you are very lucky. There's this insane little company (confederation minerals) that was exchanging hands for like a dollar and a half last year and now you can grab it for around 10 cents. These guys are sitting on gold, literally. They have proven reserves worth a few hundred mill and theyre about to begin digging out the stuff in a few months.
These emails are sent to thousands of people at once, via mail merge. The name (Beth Ross) could be a different one. As a matter a fact, we received the same email 24 hours later, from somebody called 'Angelia Clayton'. This time, the subject title was “Sorry for my late reply”. In the first example, the subject was “Do you still want this?”
If you never heard of it, this is what is known as “Pump and dump” (P&D) technique, which is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements (see video below), in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” their overvalued shares, the price falls and investors lose their money. Stocks that are the subject of pump and dump schemes are sometimes called “chop stocks”.
If a promoter's campaign to “pump” a stock is successful, it will entice unwitting investors to purchase shares of the target company. The increased demand, price, and trading volume of the stock may convince more people to believe the hype, and to buy shares as well. When the promoters behind the scheme sell (dump) their shares and stop promoting the stock, the price plummets, and other investors are left holding stock that is worth significantly less than what they paid for it.
Watch the video below to see an excerpt from the movie 'Boiler Room' explaining how the 'Pump and Dump' scheme works.
How to avoid:
Not only this is unsolicited financial advice, but it also comes from a person you don't know. Both are red flags when it comes to taking big financial decisions. Stay away from this kind of activity. As simple as that. This is also a little thing called “Insider Trading” which is what put Martha Stewart behind bars.
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