Stock scam awareness defense keeps money in your pocket using common sense, attitude, control, and education as the scam protectors that keep your money working for you and away from the crooks. The best defenses against stock scams are awareness and homework. Informed, aware investors that do their homework before making any investment are hard to scam.
What you learn in stock scam awareness defense:
Frequently Asked Questions about building a stock scam awareness defense
Is talking about or promoting a stock illegal?
Anyone can freely talk about a stock, including any they own, and share any facts or opinions they may have.
However, all company insiders must disclose ownership, knowledge, or conflicts and can not share or use non-public information, misstate facts, or mislead the public. That inside group includes officers, directors, executives, managers, and anyone with non-public company information.
As such, people who know or should know can not use inside information to promote, buy, or sell the stock.
Even so, all prudent investors remain aware that scams, lies, and liars exist! So, wise investors avoid hassle or harm by cautiously approaching every market and stock information source.
What are the most common stock scams?
Pump-and-dump schemes top the list of stock scams, followed by bogus offerings.
Pump-and-dump scams sell worthless stock by promoting it with lies and hype. Victims buy as prices get pumped ever higher.
But the scammers are the sellers dumping worthless stock before running off with the money.
In contrast, bogus offers sell dreams or mythical developments where only the scam is real! Most bogus offerings have no operations, financial statements, or revenue. Scammers collect money for worthless or non-existent units or shares and then disappear to parts unknown.
There are many variations and other scams, but investors can avoid them by following good investment basics. Most importantly, do your investment homework before making any investment.
How do stock scams work?
The most common stock scams are pump-and-dump schemes, where crooks use false information in newsletters, social media, and phone calls to pump stock prices, sell their shares for a profit, and leave investors with worthless stock.
Other scams include insider trading and short and distort schemes that illegally buy and sell shares on non-public information to profit, avoid loss, or use false information to drive prices down.
The bad guys' tools include aggressive boiler room sales operations and offshore crooks promoting fake companies or worthless penny stocks. Other schemers use phishing, malware, or social engineering to access and trade brokerage accounts without the owner's knowledge.
Investors can protect themselves by researching before investing.
How do you spot a pump and dump scam?
Pump-and-dump plays can happen with many assets. The most dramatic warning is an abrupt price surge that occurs without reason for a stock, cryptocurrency, or other investment.
Pump-and-dump warnings include:
1. Unsolicited offer from a stranger.
2. There is no substance or intrinsic value to the offer.
3. Low-value assets suddenly surge in price with no reason or sense.
4. Excessive online and social media hype offers the only support.
5. Lack of transparency about the business and all involved.
Investors avoid pump-and-dump pain by taking a pass on cryptocurrency and doing the research before any investment.
How do I protect myself from stock scams?
To avoid scams, become an informed investor who conducts thorough research before making investment decisions. Minimize scam risk by focusing on productive assets such as shares of quality dividend-paying companies.
That avoids most stock scams since scams and scammers usually target the riskier parts of the markets.
Savvy investors focused on quality investments avoid most potential risks by knowing who they are dealing with. Besides identifying the parties they deal with, they avoid high-pressure tactics or unsolicited offers.
But the best defense any investor can have is to conduct thorough research to ensure that all the information and filings they use are up-to-date, legitimate, and from reputable sources.
Are pump and dump stock promotions illegal?
Pump-and-dump schemes manipulate the price of a stock or security using false, misleading, or gross exaggerations. Although illegal, they remain a common way for scammers to deceive investors.
The scammers start by buying a large inventory of inexpensive micro or small-cap shares. Then, using phone calls and social media, they promote their story and continue as long as their lies lure investors to pay higher prices until they sell out.
Then, they vanish with the funds, leaving only worthless shares behind.
Investors who do their homework avoid falling victim to such scams. Be cautious, check for the seller's registration, reject any pressure sales tactics, and always do the research before investing.
Is it illegal to mislead investors?
Yes, misleading investors is investment fraud. But catching, proving, and convicting investment crooks is very challenging. And the rare conviction, even jail time, often means recovering little or no money or compensation.
Seeking help after fraud consumes time, energy, and money but guarantees frustration and, most often, little satisfaction. The regulators, police, and legal system, including courts and financial services, have an appallingly, shamefully, uniformly lousy record.
Instead, investors can far better avoid fraud by learning to invest well, including faithfully doing investment homework before any investment. That is the best way to lock out the crooks and scammers.
Attitude, knowledge, and action combine to provide your stock scam awareness defense
Most parts of being a successful investor come down to knowledge, a willingness to do the homework, and the ability to take any needed action. Those traits also provide the best scam protection for individual investors. This lesson gives you the knowledge and the most effective scam protection strategy for individual investors. Any investor can set up this stock market scam defense as an important part of becoming a successful investor.
By doing that and using what you learn in this lesson will protect you from scams and keep your money working for you. Scam awareness and a scam defense plan can stop crooks and scammers from picking your pockets. Most importantly, that keeps your money working to build wealth in money-making opportunities. As well, the links at the end of the lesson guide you to related content to learn more.
Any investor can set up a stock market scam defense as an important part of being a successful investor. Doing that and using what you learn in this lesson protects you from scams and keeps your money working for you. Scam awareness and a scam defense plan can stop crooks and scammers from picking your pockets. Most importantly, that keeps your money working to build wealth in money-making opportunities. As well, see the links at the end that guide you to related content if you want to learn more.
Actively use your stock scam awareness defense
Stock scams have one purpose, to separate you from your money. To prevent that, develop a stock scam awareness defense. Doing that begins with the awareness that stock scams and scammers are in markets and in our communities. But we have defenses and we can learn to avoid scams.
After awareness, and putting ourselves on guard against scams, comes the importance of doing the homework. After awareness, the best stock scam protection is to research or do the homework, on any investment before you consider investing. When we do the homework, we are not without defense. We keep working on the homework until we understand the investment, get a second opinion, and refuse to invest until we are satisfied.
As well, talking about scams with your friends and associates and how people can defend themselves. Helps us develop an aware, cooperative community that improves our scam protection. Likewise, with your own scam protectors, common sense, a defensive attitude, greed control, and education, being a positive influence for others, and having their support, help protect you and your money.
Doing investment homework means you need to learn the facts about the investment as well as what you do not know about the opportunity. Good research gives you powerful scam protection.
Superior investors avoid the FOMO Risk
Never fear you will miss out. FOMO investing or Fear Of Missing Out Investing most often, is a cause of an investment loss. Instead of FOMO investing, know those good investments are like buses, there is always another one coming! So if you are ever unsure or uncomfortable about an investment, just wait for the next good deal! It is on the way!
Stock scams can be local or span the globe
At times a single investor gets scammed, but most times, stock scammers seek to rob numerous victims. In some cases, the crime spans several countries. For example, stock scamming crooks duped investors out of $140,000,000! That was the work of four Canadian sleazebags assisted by five American stock crooks. They scammed hundreds of victims in 35 countries!
In a somewhat happy ending, authorities captured all the crooks. But people don’t get much money back. This widely reported scam made news around the world and reminds us talking about financial scams helps protect us. And more importantly, we learn more about how to defend against a stock scam. We can discuss a few facts and guidelines to keep your money working for you and out of the hands of some crook.
Your top scam protectors stock scam awareness defense
The best scam protection you have is between your ears. Your common sense, intelligence, and defensive attitude will keep you and your money safe. A big enemy of your money is your greed gland. We have to acknowledge that the greed gland exists in everyone, yes, even you. Be realistic; we must keep our greed and selfishness under control.
Combined with a little knowledge these scam protectors will help you avoid a fraud that can devastate savings from your hard work and sacrifice.
The big stock market scams
Pump and dump
Pump and dumps schemes are most often penny stock ripoffs built around the shares of a micro or small-cap company. At a very low cost, the scammers buy an inventory of cheap shares. Then using phones and/or social media the promotion, or pump begins as they spread hype and lies to attract investors and sell those shares at ever-higher prices. For round after round, promotions continue to catch buyers as prices steadily get pumped higher yet. It continues until the scammer sells out to complete the dump of shares. Then the promotion, scammer, and the money all go away! When promotion stops, buying stops, the price crashes, and investors hold shares of little or no value. Avoid such pain and loss by always doing your investment homework and remain free of such scams.
Bogus offerings
Bogus offerings are funding for dreams of riches to come or development that will never happen. In such schemes, only the scam is real! A big bogus offering tell is lack of real financial statements. Most lack any operations or revenue. Investors pay money for worthless or non-existent units or shares before scammers disappear from sight. As with so many scams, investors best protect themselves with good investment basics. First and always, do your investment homework before making any investment.
Ponzi scheme
Ponzi schemes have fooled intelligent, supposedly sophisticated investors for over 100 years. Bernie Madoff ran the largest Ponzi scheme in history with a $65 billion spanning 20 years! The scheme works by attracting investors to investments that never happen. Instead, the scammer takes the money and continually attracts new investment money which gets used for paying inflated returns to earlier investors. It is impossible but continues until the schemers can no longer attract new investors or too many already in the scheme want to liquidate their investment. Doing your investment homework and insisting on audited financial statements will keep you out of such schemes.
Pre-IPO scam
Pre-IPO scams appeal to our greed and selfish desire to get in on the ground floor of a fantastic investment opportunity! And they depend on the victim being ignorant of securities law. The scam gets built on the phantom belief an IPO, or Initial Public Offering will soon be sold for many millions or more! However, before that happens, the lucky investor has the opportunity to buy this hot stock at an early low price. Before a company IPO sells shares to the public in a stock market listing, there are private ways to fund a company. However, there are limits. Pre-IPOs need registration exemptions available only to investors meeting income and net worth requirements. They are NEVER offered in unsolicited calls. Protect yourself and your money by hanging up on any unsolicited call.
Pyramid scheme
Pyramid schemes prey or feed on new recruits attracted by existing investors. In most such schemes the so-called investors make more recruiting new members than from the investing. The investments of the newcomers pay earlier investors until the scheme collapses under the impossible weight of always attracting a new recruit. Some at the top make a fortune, most lose money. Saying no to any sales scheme build on getting paid to recruit more investors or sellers will keep you free of such schemes.
Scam news helps us learn stock scam awareness defense
When you hear of a scam, think about how you would avoid it. Try to learn something from any scam you hear about so you benefit by learning how to protect yourself. Learning about scams helps you grow and develop into a more sophisticated investor.
Below are the company names from this latest big scam. They are all fake but many have the familiar ring of a company we may think we know. As well, before the websites went down they served as excellent examples of scam sites done well. But they were the real crooked deal! Crooks had created those websites for one purpose. To steal our money!
They were very convincing websites. Some had excellent investor presentations and certainly looked like the websites of real operating companies. The sales pitches were very well done. They intended to give their prospective victims, people like you and me, a very positive impression. These guys are very good at this stuff!
12 Scam Cos - 1 US Federal Indictment
- 1Blackout Media Corp
- 2Foy Johnston Inc.
- 3Imusic Worldwide Inc.
- 4Liquid Gold International
- 5Mass Petroleum
- 6Nikron Technologies
- 7RainEarth Inc.
- 8Resource Group Intl
- 9Sync2 Networks Corp.
- 10Tal-Cap Inc.
- 11Talisman Hlds Inc.
- 12WGI Holdings Inc.
Authorities call these companies “file cabinet businesses” as there were minimal assets, the stocks were thinly traded and owned or controlled by the accused. The elaborate scheme created phony consulting businesses and even phony law firms. They issued many fake press releases. They reached around the world from centers in Vietnam, Thailand, and Canada.
Awareness and homework provide the best defense against stock scams
The scam tip-off
From the websites of these scam companies, you can learn that they trade or did trade, on the Over the Counter or OTC Market or Bulletin Board or Pink Sheet Markets. By whatever name, we covered that house of ill repute in the blog post available at this link: Sorting American OTC Stock Markets.
You will recall that we agreed beginners just should not go there. So just don’t go there. Any stock trading there is not worth your attention. Use that as your big easy tip-off. Any company trading OTC is of no interest. Ever. Check no further, just say no and keep investing in real companies listed on secure stock markets.
Next time we will discuss how scammers use social media. You also learn a simple and straightforward way to check out the sales reps. That lets you quickly find and avoid scammers letting you invest with confidence.
Why the stock scam awareness defense lesson matters
Stock scam awareness defense is critical for investing success. Your awareness makes you a more difficult target for scammers. How investors buy dips matters because corrections are part of stock markets and present opportunities for sharp investors. Savvy investors need to manage dips to produce the best investing results. Knowing the three steps covered in this lesson can put money into your pockets.
Your report can help stop a scam
Reporting scams can inform law enforcement investigators and help track down the crooks! By taking action we can fight back by turning up the heat on crime. Reporting immediately may help stop other frauds from happening and can play a role in catching scammers.
In America: see the Report Scams and Frauds
Canadian can use the Canadian Anti-Fraud Centre
Elsewhere use Google to find the Anti-Fraud agency contact information.
Takeaway points for your stock scam awareness defense
Stock scam awareness defense begins with common sense, attitude, control, and education as our scam protectors with awareness and homework our best scam defenses. Using awareness, knowledge, and action, superior investors keep their money working and away from stock scammers.
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Managing Investment Market Risks, lesson links:
Introduction to Managing Investing Market Risks Lesson 1
Dangerous dividend warning signs Lesson 2
Investor retirement saving dangers Lesson 3
Exotic ETFs blow-up portfolios Lesson 4
Stock scam awareness defense Lesson 5
Best stock scam tips Lesson 6
Bitcoin fraud trust and psychology Lesson 7
Investors hold patient cash Lesson 8
3 Risk or opportunity signals Lesson 9
Option risks, dangers and opportunities Lesson 10
Cautious look at options Lesson 11
Selling low destroys wealth Lesson 12
FAQ about investment market risks Lesson 13
Next lesson 6: 4 Stock scam tips
Have a prosperous investor day!
Bryan
White Top Investor
[email protected] WhiteTopInvestor.com
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