Scam Spammers Use IM Apps to Pump & Dump
In a September 2 Alert, FINRA warns that scammers are using messaging app spam-casts to impersonate brokers and tout micro-cap stocks to "pump" their prices, before "dumping" their positions at the top and leaving investors holding the bag. Fraudsters merely are taking advantage of newer cross-platform messaging apps (like WhatsApp) that avoid SMS charges, thus making their spam-casts easier. In a pump-and-dump scheme, the scammers take a big position, typically in a thinly-traded penny (or "microcap") stock. Then they tout the stock urgently - often on pretended inside information - in an effort to run the price up quickly. Once it soars, they sell their position at a profit, leaving the new buyers with the losses as the price returns to the basement. It exemplifies the old adage that "fools rush in where angels fear to tread." The SEC's short description of pump-and-dump schemes is here. Two years ago, regulators issued similar warnings about email and social-media abuses for the same purpose. FINRA's new Alert is here. Thomas K. Potter, III ( is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 29 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile. © 2015 by Thomas K. Potter, III (all rights reserved).
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