How pump and dump schemes work on stock markets?

Where there is a will there is a way for scammers. The internet opened an entire new mode for scam artists to try to relieve you of your money. This includes fraudulent schemes called pump and dump.

The typical pump and dump scheme involves a company creating a situation where you perceive that the value of a particular stock (or stocks) is more than it's worth. If they convince enough people to invest, the stock value will increase. They will then sell their own stocks that they purchased at a ridiculously low price and move on to the next scam.

The pump and dump schemes are based on deliberate deception and they have developed some rather imaginative ways to convince you that they are real.

Historically, these companies would hire telemarketers in a boiler-room style call center to do mass calling to potential investors. The guise that they used would include the fact that this is an unusual or once in a lifetime opportunity to get in on the ground floor of a good investment and make a lot of money for yourself.

With the internet, the schemes were brought into the electronic world and now they use emails and newsletter marketing. They will often include these penny stock companies as part of news articles in the letters to show how well they are doing. Positive articles are designed to encourage you to buy into the investment. This tactic may still involve telemarketers, but now they can respond via email or telephone.

What you may not be aware of is, the deceptive emails and newsletters that are sent out can now be tracked to see if you opened them, read them and if you clicked on any links. It will even detail the links that you clicked through on and you have instantly become a warm prospect. Ah, the miracles of technology!

Some of the scamming companies have gone to other extremes with the development of credible looking websites. They represent themselves as investment consultants and have a team of webmasters that churn out new websites each time they want to change their identity. You can read all about the penny stock companies that they are recommending (usually bogus articles) and this validates your reason to invest. Easy to use email contact or telephone numbers are available and they are staffed with, you guessed it, those same boiler room telemarketers.

When the topic turns to the money you are investing, never go with what sounds like a sure thing from someone you don't know. Do the due diligence and homework that is necessary. Check with real investment counselors. Contact your state association that monitors stocks. Be aware that there are people and their companies whose sole purpose is to take advantage of a bad economy and prey on those that are seeking the security of a fast increase on their initial investment.

There isn't any easy money, but the pump and dump schemes will do everything in their power to try to convince you that there is.

It's just an electronic version of the old fashioned shell game.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.