Pump and dump scams have been with us for hundreds of years, however recently they have evolved to keep pace with today’s world of finance.   A Pump and dump scheme is most often done with low priced stocks referred to as “penny stocks.” The scammers buy low priced stocks and then artificially inflate the price of the stocks by using text messages, faxes, Internet chat rooms and other means of communication posing as people with inside information that indicates that a stock is about to rise.  This prompts victims of the scam to buy the stock and temporarily inflate the value of the stock.  Meanwhile, the scammers sell their stock when the stock price gets bumped up and are long gone when the stock deflates and reverts back to its true value.

Scammers have increased their use of AI to enhance their pump and dump scams with phony social media accounts and AI generated deepfake videos of celebrities and real SEC registered advisors to make their scams more attractive.

Recently Julius Czurgo was sentenced to 27 months in prison for committing nineteen pump and dump scams between 2015 and 2019 that resulted in $100 million in profits.

TIPS

Remember my motto, “trust me, you can’t trust anyone.”  You should never invest in anything unless you have carefully investigated the investment and understand it fully. It is highly unlikely that a cold caller about whom you know nothing is going to be providing you with a great investment opportunity.

Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository.  This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her.  You can also check with your own state’s securities regulation office for similar information.  Many investment advisers will not be required to register with the SEC, but are required to register with your individual state’s securities regulators.   You can find your state’s agency by going to the website of the North American Securities Administrators Association.    You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular  investment adviser.

It is also important to remember that you should never  invest in something that you do not completely understand.  This was a mistake that many of Bernie Madoff’s victims made.  You also may want to check out the SEC’s investor education website at www.investor.gov.  Scammers can be very convincing and it may sound like there is a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours.

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