Penny Stock Scams Out In Force
Recent Penny Stock Scams – Beware
When it comes to penny stock scams, you’ve got to be on the lookout all the time.
Just last week, news crossed the wire about the SEC fining Oppenheimer & Co. for illegal penny stock trades! The Fine: $10 million to the SEC and $10 million to another government agency.
Crazy that a big firm like Oppenheimer got caught up in that mess.
If you want to read more about everything they did wrong, the link to the press release is right here:
SEC Charges Oppenheimer With Securities Law Violations Related to Improper Penny Stock Sales
But let me save you time…
What did Oppenheimer do?
They engaged in the “unregistered sales of billions of shares of penny stocks.”
According to the SEC, it generated $12 million in profits for the Bad Guys…
Do I need to tell you to keep your eyes peeled?
Look, the reality of the situation is, there’s a scam artist around every corner. The Scam Artist’s one goal in life is to separate you from your money.
How they do it can be quite amazing…
Penny Stock Scams Are Everywhere
Scams can be big and small and come in all shapes and sizes. They can cost investors anywhere between a few hundred dollars and their entire life savings!
It’s scary when you think about it…
That’s why I tell people to always do their own due diligence whenever trading penny stocks. It’s your money and you’ll care for it more than anybody else!
So what kinds of scams are there?
There’s hundreds, but nothing is more common than the Pump & Dump scam.
Here’s how it works…
Normally it starts with a trader getting a “Hot Tip” email or a call from a boiler room.
The opportunity sounds exciting, and our poor trader get pressured into acting quickly.
They take ALL their money and buy this one stock without doing any research, just as it’s starting to spike in volume.
Our poor trader has visions of fancy cars and vacation homes in their eyes.
Then… BAM!
A few days later, the stock starts to plummet rapidly.
What our trader doesn’t realize is the guy telling him about this great stock is secretly – or not so secretly – selling!
That’s why the stock drops in price… and when the scammer stops hyping the stock… it plummets.
The “investor” ends up holding the shares for a few days or weeks. They can’t believe this “sure thing” has just collapsed. Finally they start selling at a HUGE loss.
The scam artist has just grabbed handfuls of cash right form out trader’s pockets.
These poor traders will usually repeat the same mistake a few more times before they’re completely knocked out of the market—and left with a brokerage account balance of $7.52 or something like that.
Here’s what a pump & dump looks like…
It’s sad. And makes me a little angry!
But the good news is, this scenario is completely avoidable…
How To Identify A Penny Stock Scam
So here are three quick tips to avoiding the classic pump & dump scam.
First, ignore anyone telling you to buy right away.
If the deal is so hot right now… it will be hot in the future… wait a few days or a week, or a month. Then revisit the stock and if you still like the idea, then look to buy.
Here’s a pro tip – my biggest winners in penny stocks didn’t happen overnight… they took weeks and months to climb the charts. Most successful stocks will climb higher for days and weeks and months.
So, be very wary of someone pressuring you to buy right now!
Second, skip the stocks that trade for under a penny.
As I mentioned before, it can be risky enough buying penny stocks trading under $5 a share. But if you go under a penny, you’re truly getting the bottom of the barrel and asking for trouble.
Stocks trading for less than a penny per share often aren’t real companies at all.
They’re frequently shells, scams, and frauds. They have little or no revenue, no real products, and few employees if any at all!
The third way to avoid biased research…
In a nutshell, if you’re going to follow the advice of a newsletter, trading service, or guru, you’ve got to make sure the advice and recommendations you’re getting are UNBIASED.
That means verify that the guy writing the report isn’t being paid by the stocks they’re recommending.
If they charge a subscription fee for their newsletter, that’s fine… there’s plenty of high‐quality newsletters out there that charge for their research.
But if some worthless company is paying one of these guys to highlight their stock, you better watch out!
Think about it for a moment…
If someone is paying you to recommend their stock in your newsletter, are you really going to say anything bad?
Of course not!
If you did, they’d stop paying you… and find someone else to slap lipstick on the pig of a stock.
This is a clear conflict of interest that completely tarnishes the research being produced…
So there you have it…
Three simple tips on avoiding penny stock scams.
Good trading…
Brian Kent
Penny Stock Research
Note: Brian Kent has been trading the markets for more than two decades and now writes and edits for PennyStockResearch.com. You can sign up for the penny stock research newsletter a trusted source for the truth about penny stocks! Sign up today and get a free research report – http://www.pennystockresearch.com/free-reports/.
Category: Penny Stocks
