Making easy money is really not possible in this world. If you find something to make out easy money, remember there must be some scam artist attached to it. It is surely going to be a risky bet.
Penny stocks have the potential to prove huge and quick gains, but it comes be a high-risk proposition to your investment. These stocks are also prone to scams as these stocks are out of the scope of regulations of SEC and most of them are traded on pink sheets. We saw a lot of pump and dump schemes with marijuana stocks. You want to make sure and be very careful.
There are lots of scam artist playing into the market to make money by cheating the small investors. Below are popular scams associated with penny stocks trade:
- Scam Spam: The most popular variation of pump and dump scheme scam is Scam Spam. The penny stock prices are artificially inflated from lower levels just for purpose of trapping the small investors. It is prominently done through false and misleading statements on media, free newsletters, emails and SMS etc. later they are sold or rather dumped at higher prices to investors.read more information about penny stocks myths by clicking here
- The Short Scheme: This is very cleverly done by the scammer. The fraudster heavily short sell the stock, making small investor feel it’s not worth holding this stock. People dump their holding and fraudster quickly buys all the shares and ultimately pumps up the stock with positive hypes. This is done where the fraudster knows some good news in cooking into the business or may be positive about company growth in future.
- Fake News: This is another attribute to popular pump and dump scheme. The promoters of these penny stock companies are also misleading by giving fake press releases on popular TV news channels, newspapers and on websites. Fake positive news is released to mislead the masses to buy that particular stock and artificially increase the stock price.