There are really only two elements to the entire "pump and dump" scam.
The first, as described, is the necessity of the fraudster getting as many people as possible to buy the stock. This involves the high-pressure "boiler room" tactics of telling potential clients that the stock in question is going to go up or is going up and, in essence, the client would be a fool to miss out on the opportunity. It involves really nothing more than a high-pressure sales pitch.
The second element is: once the stock has reached its artificially inflated price, the fraudster now has the "inside knowledge" to know that the stock will soon be losing its value because the stock has been artificially inflated. At this point, before anyone can really react, the fraudster now knows that he is in the perfect position to sell which, of course, he does. He sells as much of the stock as possible. Of course by doing so, he gets an insane profit from the whole thing.
Once again, we see the high-pressure sales tactics at work.
We will discuss how to avoid this fraud in the next series of posts.
The first, as described, is the necessity of the fraudster getting as many people as possible to buy the stock. This involves the high-pressure "boiler room" tactics of telling potential clients that the stock in question is going to go up or is going up and, in essence, the client would be a fool to miss out on the opportunity. It involves really nothing more than a high-pressure sales pitch.
The second element is: once the stock has reached its artificially inflated price, the fraudster now has the "inside knowledge" to know that the stock will soon be losing its value because the stock has been artificially inflated. At this point, before anyone can really react, the fraudster now knows that he is in the perfect position to sell which, of course, he does. He sells as much of the stock as possible. Of course by doing so, he gets an insane profit from the whole thing.
Once again, we see the high-pressure sales tactics at work.
We will discuss how to avoid this fraud in the next series of posts.
NOTE: THE INFORMATION IN THIS BLOG IS NOT LEGAL ADVICE NOR
IS IT INTENDED TO BE LEGAL ADVICE. IF
THE READER HAS ANY LEGAL QUESTIONS, PLEASE REFER TO AN ATTORNEY.
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tausk
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