Con Artists Look to Make Money off Oil Disaster
By Gina Jordan
Tallahassee, FL – Beware of fraudsters looking to cash in on the oil spill. As Gina Jordan reports, don't be surprised if you suddenly find a hot scoop in your inbox.
John Gannon has a warning about unsolicited information designed to get your money. As president of the FINRA Investor Education Foundation, he is alerting stock traders to the pump and dump scam, which tends to surface after major disasters.
He says it's "an investment scam that involves usually a thinly traded company putting out news releases about its stock that indicate that it has some, in the case of the BP oil spill, some way to clean up the mess. The hope is that many investors will read those press releases, hear about it online, hear about it on social media sites, purchase the stock, driving the price of the stock up, at which point the promoters bail out, sell their stock, making a nice profit, and leave the investors holding the bag."
In other words, people who buy into the scam will probably lose most of their money. Gannon says to question why someone you don't know is providing information about a stock that promises to bring huge returns. Be wary of anyone insisting that you must invest immediately.
"It could be product scarcity, which means there's only a few shares left. But it's also time scarcity. If you don't get in today, it's going to be gone or the opportunity will be gone. So in the case of one of these pump and dump scams, the idea is you need to get in quickly before the stock price rises."
The Investor Education Foundation offers a free program called Outsmarting Investment Fraud because even experienced investors become victims.
For more information, visit www.saveandinvest.org.