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Stock Scams By Alex Weis At the inception of the Internet, no one could have foreseen its power to render information. The information being rendered through the Internet is not always beneficial though. Stock scams, not particular to the Internet, are running rampant because investors are not willing to do their own research. If not careful investors can easily lose thousands of dollars because of misleading information. Beginning investors, often targets, should specifically watch out for emails containing "great news" about a certain company. These emails usually contain false information. An investor can easily avoid a scam like this by contacting the company's investor relations office. Message boards, another hot spot for scams, are full of people trying to affect a stock a certain way. If the message posted on the board is too optimistic and unsubstantiated (no information is provided to back up their claims) then the writer of the message is probably trying to dupe the reader. Message boards can be helpful though if the investor looking through them is careful and objective. Stock
scams have been around since the beginning of the market and are
therefore not specific to the Internet. Viewers of the popular TV
show "The Sopranos" are offered with a fairly realistic
portrayal of a common stock scam. In the show the character runs
what is known as a "pump and dump" operation. Usually
during one of the scams, a small group of people buy shares of a
stock which has minimal number of shares outstanding and very little
volume. These characteristics make the stock very easy to manipulate.
After they buy a reasonably large number of shares, they start "advertising"
the company to potential buyers. In the show "The Sopranos"
the character running the operation owns a brokerage house which
touts the stock they are manipulating to customers. After many customers
buy the stock, the stock's price begins to surge and the original
group of investors dump their holdings (usually doubling their original
investment.)
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