There is a growing body of evidence that elaborate social media networks are being used in dubious link building and to fabricate testimonials, to promote certain purchasers of structured settlement payment rights and fabricate complaints and documents with the in tent to harm competitors and others whose business interests are not aligned with the beneficiaries of the scheme .
But social media is being used by "actors' to augment the traditional approach to the classic 'pump and dump" stock promotion scheme. Based on what I have just seen and heard it is time to sound the alarm bell.
I received a call the other day from a Los Angeles California area based company that was pitching penny stocks (a/k/a microcap stocks). As I heard it, the scheme works like this:
Step 1
Company A contacts and draws interest from lead investors who each agree to buy 10,000 shares in a touted penny stock to show to others that there is interest. The pitch from company A lays out the scheme and Company promises that it will let the lead investors know exactly when to get out (2 weeks into the promotion the solicitor told me)
Step 2
Once the lead group of investors has been 'filled' Company A begins to promote ("pump") the stock through the Internet, drawing in the secondary group of investors
Step 3
Company A stops promoting the stock and the stock plummets. Secondary investors and greedy initial investors lose their shirts.
The promoter who contacted me related some "recent examples of recommendations" that included a stock that they "recommended " at 17 cents" that went to $2.40 and then down to 5 cents between April 2012 and June 2012. I was shown three examples whose charts looked like a squished bell curve.
Plaintiffs should be aware of pump and dump schemes. Protect your recovery! Know one when they hear the approach and AVOID.
SEC Website Information About Pump and Dump Schemes
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