ATTORNEY NEWSLETTER

Duo Caught in Pump and Dump Scam

Beware Boiler Room Tactics With Penny Stocks

Sometimes the government gets the bad guys. This week a Manhattan jury returned unanimous guilty verdicts against two financial advisors who bilked over 100 people out of at least $15 million. Defendants ran a classic pump and dump scam. We want to share the facts of the case so you know what to look for if you get a high-pressure sales pitch on a penny stock and feel skeptical about it. Hint: your uneasiness may be well-founded.

In a pump and dump scam, brokers artificially inflate the price of a stock (usually an OTC penny stock) and then dump their own shares ahead of the inevitable price collapse. Basically, all the brokers are doing is talking and making stuff up; there typically is nothing (or next to nothing) really happening in the company they’re touting. Here, defendants ran shares of VGTel up from $.25 to $2.00 in less than a couple of weeks. The company, they claimed, was worth millions. Today the stock closed at .0005, with a market value of $13,000. Defendants put over 100 people in the stock and raised a lot of private money on the artificially induced trading volume.

What can we learn? Beware the high-pressure pitch on a penny stock. To be sure, some sophisticated investors know how to play these volatile, illiquid stocks. And some know what to look for in terms of true value. The rest of us, however, should obey the warning sign on penny stocks: there’s a reason they trade for pennies – there’s not much value in the underlying business. Pump and dumps, front running, Ponzi schemes, and insider trading are just some of the variations of fraud out there. Do your homework on anyone giving you a pitch. Start by checking out their record on Investor.gov. Use Google too. And if you’re already in and have suffered a loss, seek out representation.

Contact Us

If you or someone you love is the victim of any type of securities or other financial fraud or financial elder abuse and are looking for help in San Francisco County or in any California county, contact the Evans Law Firm elder attorneys at (415) 441-8669, or by email at info@evanslaw.com. Our attorneys have experience with fraud and financial elder abuse cases and complex qui tam or whistleblower cases, complex financial contract cases and cases against large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We also handle cases involving physical elder abuse, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.