Fraudulent Activities In Penny Stocks

Scams In Penny Stocks

Most penny stocks traders suffer from fraud especially from those engaged in fraudulent measures to sell their services.

The Securities and Exchange Commission of United States of America seems to be incompetent in dealing with them as many such activities takes place daily.

The recommended stocks are highly risky due to various reasons and fraud is one of the reasons.

Sometimes a few market makers control the stock and thus adopt the fraudulent activities such s spam and phone calls.

Role Of Brokers Or Market Makers

In recent years, the fraudulent activities of some of them – especially offshore trading companies – has been undiscovered by people and reported to the Securities and Exchange Commission of United States.

If a company offers a few market makers to buy or sell the penny stocks, these market makers tend to create hype and mislead the investor into buying or selling.

As all company stocks are in control of a bunch of people, they manipulate the stock prices.

Many times, the company pay for some dealers or brokers for selling the stocks and for getting more money.

That is through brokers or dealers adopting fraudulent methods for selling the stocks.

They will generally contact you over phone and hype about the stocks.

Sometimes the dealer or broker can use email to convince the people.

People from lower-and-even-middle-income families tend to fall for such fraud.

Sometimes they offer free stocks and after manipulating the prices, they will ask for more investment to top up investors’ capital and, their commissions.

This may be one technique to lure the people out of greed but you should avoid taking free penny stocks.

How They Reach Out To People Like You And Me

Sometimes free emails and Youtube videos are sent to the people.

Initially they will ask for a small investment and let you withdraw smaller portions just to make you feel happy for a while.

But when you want to continue trading, earn and withdraw more profits, that is when you see their true colors.

They will keep on asking you for more money in exchange for fulfilling your dreams but, they are fulfilling theirs since the only translations come from you transferring money to them.

Once you are broke, their job is done, and they will proceed to target other victims.

That is how they get rich.

Having said that, you should go through the prospectus of the company and see all the particulars including risk factors very carefully.

Penny stocks listed at pink sheets are highly risky and you should ensure about these stocks before investing in them.

You should enquire about your broker from the state office of the Securities and Exchange Commission before dealing with the broker.

Still on top of those, my best advice is for you to take up a penny stock trading course from real accomplished professional to educate yourself and be better in researching and trading when on your own.


Review Of Penny Stock Prophets

Created by James Connelly, Penny Stock Prophet is an online learning program in which the creator identifies penny stocks that he claims should increase their value.

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