Securities or Stocks fraud is a very common and unfortunately, largely unpunished form of fraudulent behavoir. One of the most common type of fraud is the pump and dump scam. These scams are most commonly associated with penny aka micro cap stocks.
In a pump and dump scam, the fraudster will accumulate a position in a stock that he or she may or may not own or may or may not be affiliated with. They will do so slowly in order to keep prices low and stable. Once they have a large position of a particular stock accumulated, they will begin spamming individuals via regular mail, email, websites or boiler room call centres to buy a particular stock. As those who are being scammed buy the stock, the price will go up. All the while, the fraudsters are selling the stocks in question and making lots of money.
When the fraudsters have sold all their stock, generally the pump will stop and people who invested might lose most of what they invested or everything.
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