Remember ‘Beanie Babies?’ Millions of people do. They were a ‘craze’ in the 1990s and while the company somehow manages to remain in business, they pulled the wool over their customers’ eyes for a major scam. What they did was create the illusion that these little stuffed animals would be incredibly valuable in short order because they were only manufacturing a limited number.
This drove people to buy, buy, buy. They were buying these items left and right and that led to a supply issue, thus driving the prices up. Some people ended up paying hundreds and even thousands of dollars for tiny plush stuffed animals … all while the company was sitting on a warehouse full of them. Then the company released them from the warehouse and made a fortune. When people finally realized what had happened, those stuffed animals were worth next to nothing.
Welcome to the Pump and Dump Stock Scam
This scam is very similar, and it’s very common. The problem for a lot of investors who may not have a great deal of experience is that they can sound completely legitimate. These scams have fooled some very savvy investors (we’re talking to you, Bernie Madoff). While it’s not a ponzi scheme, it’s easy to be fooled.
A pump and dump stock scam essentially works like this:
You receive an email alert from someone talking about a great opportunity coming up. This sounds like ‘insider’ information and the stock is absolutely cheap. But it’s only a matter of a day or two before the word gets out and everyone is onto it, snatching up the stock and driving the price up.
So you join the party. It doesn’t cost you much, so that’s cool. Within a few days, the price of that stock is up about 1000% and you’re feeling awesome. Then, suddenly, it crashes. Your investment is completely busted. How did that happen?
Well, the ones who set up the stock and sent that incredible ‘information’ basically lure people in with well crafted stories and when they drive the price up, when they know it’s peaked, they sell, earning a huge profit before it crumbles. You’re left holding the check with an empty wallet. Everycloudtech has a wealth of resources to help people like you avoid these scams.
This email slipped past a lot of filters.
Many people started receiving alerts about ECGR (Bellatora Inc) recently. It was advising them that this company was just about to take off, that to miss the boat on this stock offering would be like throwing away a fortune.
How to spot these scams.
The best way to stay on top of these scams is to be aware of how they’re structured. First, the subject makes it sound like a stock is poised to jump in value by a ridiculous amount in only a few weeks. Investors open the email to see what’s going on and notice some compelling arguments why this might happen.
Take it from us … no one can honestly make bold claims like any company’s stock’s going to increase by tenfold within a week or two. It doesn’t happen.
Stocks do skyrocket, but it’s not that predictable when they do.
Temper your enthusiasm to hit the lottery with an investment and instead rely on good sources and plan for the long haul. Your investments will likely pan out better when they do and you’ll avoid being a victim of these scams.