Any advice on how to protect yourself against a “pump and dump” scheme?

May 28, 2023 By bmapk

Any advice on how to protect yourself against a “pump and dump” scheme?

A stock “pump and dump” plan occurs when a con artist presents you with what seems to be a good deal on a stock, often known as a lifetime investment. While the stock’s price may have risen artificially, your acquisition will result in a large loss in value. And that might mean your money goes down the drain.

  1. The initial “brokerage firm” in the scam Once enough investors have grossly overpaid for the stock, the scam artist will sell it all at a high price before the value dramatically decreases. When the con artist disappears, the value of the stock is far lower than what the investors paid for it. If an investor tries to unload their shares, they may find few or no takers.
  2. Social media, chat room advertisements, and even bulletin boards are common places for these scams to take place.
  3. Always use caution while giving out personal information, especially in response to an unsolicited phone call or online offer. Some data sources may be unreliable or even fraudulent.

You will have the knowledge necessary to avoid being a victim of this swindle. Five strategies will help you spot and avoid a pump-and-dump scam:

Verify everything before putting money into it. If you want to protect yourself from investment fraud, check the credentials of anyone offering you financial services. Before giving investing advice or selling securities, a person is typically required to become registered with their local securities regulator.

  • Take a second look. Investing possibilities that come to you uninvited, whether through friends, the internet, or the phone, should be approached with caution. Get in touch with the Ontario Securities Commission before putting your money anywhere.
  • You could also get a second opinion from a different, verified, and qualified advisor. A lawyer or accountant may also be consulted.
  • You should not rush this.
    Stay away from time-sensitive deals and pushy salespeople. You can make an investment right away if you want to. Nonetheless, take your time in order to make a well-thought-out choice.

Learn as much as you can about the investment.
Know the costs and potential losses of every investment before making one. Make sure it fits well with your long-term financial plans by asking questions and checking it out right away. Determine the best resource for learning about the firm.

Spread the word about this investment fraud. Many people who have lost money to investment fraud don’t come forward because they feel guilty about it. However, if the incident is not reported, other people may fall prey to the same scam.

SUMMARY CONCLUSION If the source is an unknown caller or the internet, you should exercise caution. For example, many online message boards permit members to use pseudonyms, making it difficult to ascertain their genuine identities. Furthermore, it may appear like many people are interested in a small, infrequently traded stock if the same person sends a large number of messages using different screen identities. It is also possible for someone to unjustly influence the price of a stock by publishing favorable or negative information about it.

If you wish to safeguard yourself and your finances from these unwelcome and unneeded scams, it’s in your best interest to use the strategies and suggestions shown here. Finally, don’t rely exclusively on what you read online or hear over the phone when making an investment decision.


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