The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called E-Cigarette Stock Scams: New Smoking Technology Could Light Up Pump-and-Dump Fraud cautioning investors against “pump and dump” fraud and offering tips to avoid being victimized.
FINRA has warned investors that while it is possible that E-Cigarettes could lead to promising investment opportunities, they could also give rise to “pump and dump” scams. FINRA is concerned that fraudsters may induce investors into purchasing stock through aggressive stock promotion activities which may ultimately result in a classic “pump and dump” fraud. FINRA has advised that the “pump and dump” scam begins when investors are lured into making investments as a result of aggressive and optimistic statements about the business. The promotion intended to create demand for the company’s shares. Then, once the share price and volume increase, the fraudsters behind the scam sell off their shares at a profit and stop promoting the stock. This in turn causes the price of the stock to fall and leaves the unsuspecting investors with worthless, or near-worthless, stock.
FINRA has provided eight (8) tips to assist would-be investors from being victimized by a potential e-cigarette stock scam.
- Be skeptical of social media and promotional materials provided by unknown senders, especially if the information is always positive, similar and contains no mention of risk.
• Research the company before investing.
• Research where the stock trades.
• Research the company’s SEC filings.
• Be wary of reverse merger activity.
• Be wary of claims of being the next big thing.
• Be wary of companies that often change their name or business focus.
• Carefully read the disclosure statements.
If you and have suffered investment losses, please contact the Hanley Law to explore your legal options. The Hanley Law is dedicated to helping investors who have been victims of securities fraud. If you have lost money as a result of securities fraud, you may be able to recover your financial losses. Contact us today toll free at (239) 649-0050 for a free initial consultation.