The Truth About Penny Stock Scams

| September 26, 2014 | 2 Comments

BewarePenny Stock Scams And Lost Money

I hear it all the time… and I see it all the time…

Penny Stock Scammers & Scoundrels working hard to separate honest people from their hard earned money.

Every day, the penny stock scammers are hard at work.  And unfortunately, they only need a few inexperienced investors to take advantage of.

How do these penny stock scammers get away with murder?

Well, before we get into that… let’s look at how a penny stock scam works.

How A Penny Stock Scam Works

A penny stock scam is fairly simple to put together… and there’s a very fine line between the legal and illegal worlds.

Let me say this… Just because it’s legal doesn’t make it ethical or right.

In my opinion, these penny stock scammers are ruining the markets and making them dangerous places for people to trade.  So be careful when dealing with Penny Stock Scams.

So here’s how a penny stock scam works in just 5 steps…

Step One

Identify a penny stock company that has tons of shares outstanding and little to no business prospects.  The less involved the management team, the better.  Many times the management team has no idea what’s going on… but sometimes, they’re involved and in bed with the penny stock scammers!

Step Two

Once you’ve identified the company… start slowly buying up shares… This is where the scammers and scoundrels lay their trap.  They will start buying up shares as cheap as possible…

And if they’re in bed with the management team, often times they will just be given shares!

The penny stock scammers come in with the goal of scooping up hundreds of thousands… if not millions of shares… all on the cheap!

Step Three 

Start promoting the stock and the company!  Once the penny stock scammers have amassed a war chest of cheap shares, the promotions start.

These scammers start promoting the company any way they can.

They put out press release after press release, they pay for physical mailings to other penny stock investors; They rent email lists and blast out hundreds of millions – or billions of emails hyping the company; They might even employ overseas phone rooms to hype the company or talk up the stock.

The company hype can be real or fake – it doesn’t matter to the scammers… they’re going to be gone soon anyway!

Remember the goal of the promotions is to drive the stock higher so they can sell quickly!

Step Four 

This is where the penny stock scammers make all their money.  They watch the stock climb and start selling out… but of course, they do more promotions!

You see, once the bigger fools behind a stock start coming out of the woodwork and buying, the price will climb.  That’s all the more reason for the penny stock scammer to keep pumping up the story.

This is when you see emails and promotions around the recent price increase… you get the penny stock scammers begging and pleading for you to invest now before the stock doubles or triples in price…

Be careful… this is when the big selling starts to happen… the penny stock scammer starts selling his millions of cheap shares… and he keeps selling and selling and selling and selling until there isn’t anything left.

The penny stock scammer collects millions of dollars from unwary investors.

Step Five

This is the worst part of the process – watching the stock collapse.

The penny stock scammer has no morals, no pride.  They prey on beginner investors who don’t know better… they take advantage of the weak and infirm.

They don’t care who they hurt… as long as they make money…

After the stock collapses, they slither back into the shadows and look for their next victim.

And the honest investors who got caught up in the hype and excitement of the penny stock trade are left holding worthless shares.

How The Penny Stock Scammers Get Away With It

The sad truth about all this is most of the time it’s 100% legal.

You see, if you’re going to hype a stock, according to the rules, you need to tell people you own the stock and you’re going to sell it.

The lawyers call it disclosure.

That’s why I always read the fine print on a stock promotion.  I’ll tell you, if you want to really protect yourself from the penny stock scammers, the next time you see a stock being hyped, read the fine print.

I know it’s a pain.

But read it, and read it all.

You’ll be shocked to learn how these groups are making money and just what they intend to do with their shares.

And if there’s no fine print?

Then this penny stock scammer is breaking the law… and I hope he gets thrown in jail!

Now you know how a penny stock scam works… you’ve been warned.

And I showed you how to protect yourself from penny stock scams – just do a little bit of reading.

I don’t touch these stocks with 100 foot poles and neither should you!

Profitably Yours,

Penny Stock Research

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Category: Penny Stock Alerts, Pump & Dump Alerts

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Comments (2)

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  1. Anna says:

    I am one of those unfortunate beginner investors and your story is exactly what happened to me. I feel like an idiot–an impoverished idiot! But, how is your research different from the others? Do you not invest in and sell the same stocks that you recommend?

    • admin says:

      Hi Anna, Sorry to hear your story… that’s unfortunate. Use it as a learning experience and you’ll look back on this as a great lesson learned when trading penny stocks. You have a good question – how is Penny Stock Research different from others out there – first off, we don’t take compensation from hedge funds, mutual funds, Investor Relations Groups, or the companies themselves. So our recommendations are unbiased. And if we ever do have a financial interest in a stock we will disclose that information clearly in the article! Keep reading, we love sharing great information for investors just like you!

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