FINRA Cautions Investors to Watch Out For “Pump-and-Dump Scams” Using Energy Stocks

FINRA (Financial Industry Regulatory Authority) is warning investors to look out for “pump-and-dump” scams focusing on energy stocks. FINRA says that these scams involve energy stocks that are thinly traded issues from companies that are not well known.

In the alert that it issued on October 23, FINRA says that the purpose of the scams is to increase a stock’s price using misleading or false statements that create a demand for a company’s shares. The people who “pumped” the stock then sell their shares when the stock price is high enough. Investors are then left with stock that are worthless.

In one scam, investors were encouraged to invest in a Texas energy company involved in a business deal with a $23 million Chinese oil monopoly. The backers of the scheme told investors that they would receive huge returns if they invested immediately.

Another scheme promised investors that a $5,000 could be converted into $26,500 within four months.

Pump-and-dump scammers are sending their pitches to investors via e-mail, text message, and cell phone. One fax promised an unrealistic and fast investment return. FINRA is urging investors to ignore e-mails and faxes that are unsolicited.

FINRA is also urging investors to be wary of offers that seem too good to be true. It also suggests that investors research any firm that they are considering investing in and get more information about the source that is soliciting investments.

The SEC is also cautioning investors to be wary of scams promoting gas and oil investments.

If you are the victim of a pump-and-dump scheme or any other kind of investment fraud scam, you should contact Shepherd Smith and Edwards right away. We are one of the country’s premier securities fraud law firms. We are committed to helping investors recover their lost investments. Contact us online to request your free consultation.

Related Web Resources:

FINRA Identifies Energy Stocks as Latest “Pump and Dump” Scheme, FINRA, October 23, 2007
Investors warned over pump-and-dump energy scams, Reuters, October 23, 2007

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