Email Share Scams

Email Scams are Common Place

Every now and again it is important to highlight some of the common scams or “sharp practices” that are prevalent in the market place. With the world’s ever-increasing reliance on technology, e-mail stock scams have become commonplace.

In September 2009 the Australian Competition and Consumer Commission says scams are costing Australian consumers $1 billion a year.

Almost everybody with an e-mail address would have received the 'Nigerian' scam e-mail. This scam operates on the concept of ever-present human greed replacing common sense, with the end result being the scammers having access to your bank account or alternatively, the recipient actually transferring money to them.

E-mail stock scams: "Pump and Dump"

They rely on 'pump and dump'. That is, the scammer will hold stock (normally in relatively unknown companies) that they ramp up via positive statements, thereby increasing the price of the stock. The scammer then sells the stock at an inflated price. Here are some of the basic variations:

An e-mail arrives from the USA, the message is simple; a stock is going to run, get in before it is too late! The company is about to sign a deal in China or India and they are set for a MASSIVE rise in price.

What you need to be aware of is that:

1. The promoter will not declare that they hold a position and that they will dump their holding at any time for a profit, leaving you to hold the baby. They are the ones that have bought early and are going to sell (and stop promoting the stock), well before the 'target' price is reached.
2. The stock is probably traded on a small exchange such as the Vancouver Ventures Exchange. That begs the question, “Do you know what the regulations are to be listed on that exchange? We don't!

A second example is when an e-mail arrives in your in-box from a research company with a very serious sounding name. The e-mail appears to be addressed to somebody else but must have been sent to you accidentally, it contains a 'confidential' report on a previously underperforming and un-traded company that is about to make an announcement about a new discovery of Gold / Diamonds / Uranium in one of their mining claims.

Alternatively, you could start receiving e-mails from somebody they recommend that you buy XYZ stock (listed on the NYSE) as it is going to rise.

• A week later you receive a follow up that it has in fact risen and that the next stock to buy is XXX.
• The following week you receive another message; XXX has risen, look out for PQR as it is definitely going to rise.
• As if by magic PQR does rise, and an e-mail arrives saying that if you had invested $10,000 in the first e-mail recommendation then you would know have $60,000! Be sure to invest $20,000 in the next stock - XMK.

What you will not know is that the scammers started off with a list of 1 million e-mail addresses. Half got the original message that the stock would rise; half that it would fall.

The 500,000 that were 'successful' then received the 2nd e-mail, again, the 'successful 250,000 receive the 3rd e-mail and so on...

So your scammer has been 100% correct in their stock 'prediction' for 1/8 of the original 1 million, that is 125,000 people that have reason to 'trust' the next prediction. This will be a micro-cap stock that the scammer has a majority holding in that is listed on an obscure exchange. But even if only 1% of the remaining 125,000 commit $20,000 that is a massive $25 million going to the scammer.