Investor Alert – Messaging Apps & Pump and Dump Scams
On September 2, 2015, the Financial Industry Regulatory Authority (FINRA) issued an investor alert warning about investor relations activity and stock promotions sent through popular messaging applications (Apps) such as WhatsApp. These messaging Apps allow users to almost instantly exchange messages which makes them appealing tools for scammers engaged in pump and dump schemes seeking to trick investors.
According to FINRA’s investor alert, scammers use messaging apps to transmit spam messages that promote penny stocks or microcap stocks. They used spam activity disseminated over WhatsApp as an example. Recently, WhatsApp users were flooded with text messages touting Avra, Inc. (AVRN), a penny stock. The App messages appeared to be sent from individuals at well-known brokerage firms. Using only a first name (“Hi it’s Will at XYZ firm…”), the text would talk up the stock. One WhatsApp message claimed AVRN was “going to double in the next few days.” Another said it “is going up 300% next week.”
The App scam is a variation of the pump-and-dump scam, where fraudsters use spam—in this case transmitted through the mass push feature of a messaging app—to tout a stock. The buying that follows will “pump” up the price—until the fraudsters “dump” their shares by selling them at a peak. Once the fraudsters stop hyping the stock, the price typically falls dramatically—and investors lose their money or are left with worthless, or near worthless, stock.
Users of app messaging services should treat these messages with extreme caution. When it comes to pump-and-dump spam, the smartest play is the easiest. Don’t respond—just delete.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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