Pump & Dump Stock Picks- How to Avoid

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Did you know we had a Mail Bag? We do! Our team, including two MSFT Security MVPs, select good questions from the Mail Bag and give it our best shot.

Question: I receive lots of hot stock tips in my email. Are these legitimate stocks? Should I invest?

Disclaimer: We don't give investment advice...but what you are referring to is commonly called a Pump & Dump stock scam.

Like many people you probably get alot of spam- even with the better filters we have today. Have you ever noticed how many spams are touting a particular stock? Usually this is a slimly traded stock on a small exchange for only pennies a share. In a recent Honeypot studied it was found that 3% of all the spam collected were actually pump & dump scams! Still at pennies a share it seems so easy to make money! Not so.

New research was released recently about these "pump and dump" schemes. The way it works is the stock owners or holders send out massive amounts of spam touting their stock, somtimes resorting to pumping them on up on stock related message boards with false or misleading claims.

What was really interesting in this study is the researchers found that the more spam sent actually sent the stock of the price higher- naturally the scamsters unload the stock as it peaks and the regular investors are left holding the bag.

Answer: If you get e-mails like these simply hit delete. They are more than likely scammers tricks stacked against you in order to part you from your hard earned money. The only ones profiting from these "spam e-mail tips" are the senders themselves- in this case spammers.

For more on Pump & Dump Stock Scams read this illuminating article.

If you still aren't sure check out this savvy fellow who charted a variety of spam touted stocks and see for yourself just how "good" the returns where: Spamstocktracker.com. We suspect that some of these fraudsters might using botnets as spam relays so they can send out literally millions of these types of thinly traded, dubious equities.

Imagine that- a whole legion of zombie machines working OTC stocks. Again- hit delete and don't fall for it.

1 Comments

Is there any way to block these 'Pump and Dump' emails?

I get at least one per day but the sender as well as the subject are always different and I have not found a way to automatically delete them.

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This page contains a single entry by published on April 10, 2006 10:36 AM.

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