Pump & Dumps Schemes in the Stock Market continued..jp

Wall St plaqeon wall

Don’t ever let go of the notion that stock touts are not working for you, no matter how magnanimous they sound.  They are working for their clients, namely the insiders who hired them to them to promote, market and pimp their stock.  These touts rely on the success of their current promotion to be able to get them future clients and promotions.  Their success is gauged by their ability to separate you from your money.  As a result, they will say anything to make you believe that they are credible and their clients are the real deal.

Here are some of the common lies a tout will spout in order to gain credibility for himself and his client:


as seen on TV

Touts often like to make themselves sound important and credible, concocting lies about their connections and visibility.  One of the more common lies they post on their website is the “As Seen On” boast where they’ll post the logos of television networks and important websites to give you the impression that they’ve been relied on as a source of information by journalists.  This is an out and out lie, as no legitimate media is going to rely on these hustlers for any information.  The only time you’ll may ever seen a penny stock tout on TV is if one is busted for running a massive stock fraud.  In fact, we’re pretty sure that any of these news organizations would have attorneys issue a cease and desist letter if they got wind of their trademarked logos being used for these devious schemes.

“We are working hard and researching companies so that we can bring you our next pick,”  The only research these guys are conducting is to find the next insider who will write them a check.  Then the “exhaustive” research they’ve done on their client company will consist of parroting the company’s press releases within the tout’s own mailings.  They are not “discovering” undervalued plays or finding “unique opportunities” or presenting you a “revolutionary” company.

“Easy 3 bagger!” or “Is this stock going to double tomorrow?”, or “This could Soar 300% tomorrow!”.  Not only are these kinds of price predictions an absolute indicator of a pump and dump, they are 100% illegal.  It is fine to set a price target based on solid research.  But making outrageous prognostications of ridiculous increases in a short period of time is fraud.  And many have gone to prison for it.

“Is GOOGLE about to buy out this company?” You get this kind of rhetorical question a lot from touts trying to put a bug in your ear.  Just as illegal as making ridiculous predictions of share price increase, you can be guaranteed that whatever con job the tout is trying to make you believe, it is never going to happen.

Touts always like to use the highest attained share price as a sign that “they were right”  Often they will give only partial reports on the day’s trading of their promoted stock.  For example, they’ll boast that, “the stock gained as much as 700% today”, without mentioning that the stock closed down 50%.  Or they’ll broadcast the stocks gains without mention that only a few shares traded.  And they’ll always forget to talk about the stock tomorrow, when it has given back all of its gains and then some.

Our favorite boast is when they’ll reissue an alert on a past tout. “We’ve been right before on this stock and now we think it’s ready for another run.”  What they forgot to tell you is that the stock is now trading at a lower price than it was when they issued their first alert.  In other words, they forgot to tell you that a ton of people lost money on the stock directly because of this tout’s last recommendation!  They bought it at higher prices and were left holding the bag or sold at lower prices when the promotion ended.

If a stock promotion hasn’t been successful then it must be the fault of the naysayers and the shorts.  It couldn’t possibly be that nobody was buying the story or that insiders were selling into the promotion.  Comments in follow-up emails like, “We were battling with the shorts”, are a sure sign that a pump and dump program was on.  The battle was not with the shorts but with the insiders who were filling all the bids they could.  After all, if the so-called shorts were willing to sell stock at lower prices, then why wouldn’t they have hit bids prior to the promotion?

Touts are required to disclose their compensation and name their benefactors within their promotional materials.  Many refuse to do so, thereby blatantly breaking the law.  Others will outright lie and claim that they were not compensated for their work.  Still others will overstate their compensation in order to give the appearance of a massive promotional effort thereby lending hope to an extended campaign.  This type of ruse has proven very effective in the past with claims of $2 million dollar promotional campaigns.  One would have to question how a company with a few hundred dollars in the bank would expect to pay for a $2 million dollar promotion if it was not by selling stock.  Furthermore, a reasonable person would question whether that two million dollars would not have been better spent on executing the company’s purported line of business.

The most common form of compensation disclosure fraud is the “Third Party” con.  Insiders hide their intent to sell stock by having some third party hire the tout, thus leaving the insiders free to claim innocence and lack of knowledge of any pump and dump scheme.  They will sometimes even take the step of  deflecting responsibility by issuing a press release refuting the promotion, deeming it “unauthorized” and claiming that it has no knowledge as to who the perpetrators of the campaign might be.  This often occurs after an inquiry by the SEC or other regulatory body.

Occasionally, a tout will take the good news from one company and “accidentally” apply it to another, dormant penny stock with a similar name.  He’ll buy up a bunch of the dormant company’s cheap stock and then tout the real company’s news as if it belonged to the dormant company.  Although this “error” is usually recognized in fairly short order by investors, it still often enables the tout to cash in from those who did not immediately see that they were being conned.

To make their real pick seem more legitimate, a tout will often pick a real company to tout along with the scam company.  In this way, he is trying to get you lump in the two companies together and believe that they have similar legitimacy.  You’ll see a story about a $100 stock or two touted together with the story about a 5 cent stock and the hope is that you’ll think, “Hey maybe the 5 cent stock is a better buy.”

Sometimes, the tout will even make the scam even look like an after thought.  For example; “We really like gold stocks right now, which is why you should look at our favorites: ABX and GOLD. We think that GGRI could be an up and coming player too.”  While ABX and GOLD are legitimate and actual gold producers, GGRI was and is a sheet pink scam.

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SourcesPumps & Dumps, Blue’s research Team


Blue’s Comments / JP

I will continue to share this info to all that want to read it..I can’t say enough on how important it is to arm yourself with knowledge before trading in any market with the Stock Market playing field..It is my hopes to help you to be a better Investor armed with good Information to help you to level out that playing field the best you can..thanks and good luck with your Investments..jp

9 Unscrupulous Things A Stock Tout Will Do To Gain Your Confidence.