Fraudulent Activites in the Stock Market

Discussion in 'Trading' started by Kanan, May 13, 2007.

  1. Kanan


    I was watching a Documentary about the Share Market a couple of days ago. The documentary mentioned fraud and illegal activities which occasionally occur in the stock market. One method highlighted by the documentary was a method which involves artificially inflating the value of a stock through misleading promotions. This is called the “PUMP and DUMP” scheme.

    With the ‘pump and dump’ scheme, a group of people will buy a large amount of shares at a low price. Once the shares have been purchased, they will then begin falsely promoting the share price on the internet, through emails (spam), and other means. For example, the email they distribute may give a list of reasons (all phony) why you should purchase that particular share, and the company’s plans for the future. This entices people to purchase shares in the company. This will increase demand for the shares, and as demand increases, so too does the price of the shares (Demand increases  Price increases). The share price will continue to increase as long as demand for the shares continued to increase. Once the shares reach a certain price, the group involved in this scheme will begin to sell their holdings (shares), creating in a massive profit. Since the group no longer holds shares in the company, they will stop sending promotional emails and information about the company. After a while, the new owners of the shares (the people who purchased the shares at the higher prices) will realise they have been victims of a scam, and that the company’s shares are extremely overpriced. This then causes a sudden fall in the share price of the company, resulting in losses for most of the new investors.

    As an investor, you must be extremely careful when buying shares. It is very important to be patient and conduct thorough research before purchasing any shares.

    If you know any other types of stock market fraud which investors should be aware of, please provide some details about them.

    I hope that this thread will make you aware of some of the fraudulent activities involved with the share market.

    Any other comments, opinions or thoughts are welcome. Please provide you views on this topic.

    By: Kanan Zamanzadeh
  2. The question is:

    When do children first begin to manipulate their parents or the world they live in?

    With their first breath.


    So goes the market. I suppose one might subscribe to the theories of Graham & Dodd (security analysis)and bet your money that good eventually trumps evil. With a companies first breath of life via IPO the stock becomes manipulated.
  3. It's more likely to occur in penny stocks. All the more reason to avoid those issues.
  4. if you get in early on a pump and dump you can make lots of money

    the key is selling b4 th dump
  5. You should write a book on the subject...what an informative post...your level of personal excellence and articulation can not be met by man nor god stock_turder, you're a genius. :D
  6. razor99


    i would like to kmow who would buy a stock based on an e-mail they recieved? i just do't get it.
  7. One of my favorites is the apparently mistaken phone messagerleft on your recorder telling a "friend" of the caller about a small cap stock that is going to zoom.

    Of course, my favorite was the offer for a large-cap stock made early one morning several years ago by what turned out to be some student living in a $130/ month Beijing apartment.

    Maybe he is also behind the takeover of Manchester United:
  8. Make money buy buying on the breakout day

    hold for 3 days usually
  9. Kanan


    In the documentary, it interviewed 4 people who were dumb enough to purchase the stocks they had read about in their emails.

    The ironic thing is that 2 of the 4 were wealthy businessmen.
  10. ........they have more dollars than sense!
    #10     May 14, 2007