Penny stocks have the ability to generate a TON of cash flow to the end user if done correctly. What do we all know about society today? Scam artists go to where the money is. You can bet your bottom dollar if there isn’t money involved, there isn’t a scam artist around. This is why I have compiled some of the most basic penny stock scams for you guys to mull over and analyze. If you feel you are involved in one of these, get the heck out!
The Pump And Dump
Probably one of the most popular scams around, a shady or non legitimate newsletter will publish a report “pumping” a terrible stock up. Of course with most penny stock traders being naive they instantly purchase the stock. Little do they know, the newsletter owners have a massive chunk of shares and are only doing this to pump the value up. They sell when it peaks, and you cry as it drops. Read more here
The Short And Distort
Let’s assume everything is the same as the pump and dump. We’ve got some scam artists running a newsletter and they want to get exponential value for a stock they have their eyes on. Except this time instead of pumping the stock up, the issuers short sell a ton of shares and trash a probably reasonably penny stock. This causes sellers to sell their shares and the price of the stock plummets. You are usually caught between a rock and a hard place when the fall happens as there isn’t any buyers to fill your order. The short sellers close their positions when the stock hits rock bottom, pay back their brokerages and make a fortune. Read more here
Fake Social Media Followers
Most penny stock “insiders” make money off loyal followers who sub to their newsletters and pay a monthly/ yearly fee. But, in todays age it is literally so easy to grow your following. Listen, if I wanted to I could go over to Fiver and flood about 10 000 followers to my Facebook page if I wanted to. I could also call these 10 year old Russians “loyal subscribers”. In turn, this gets more people subbing to their shady newsletter and enables you to fall into a trap like the scams above. Buyer beware with penny stocks for sure, you never know what you are getting into!
I’m going to be adding more of these in the near future, but I hope these 3 will help you identify if you’re getting ripped or not!