Pump-and-dump scams, also known as
boiler room scams, used to rely on cold calls as a way to artificially increase the price
of a stock and take advantage of unsuspecting investors.
Nowadays, scammers also utilize social media, websites, and press releases.
In one case back in late 2013 and early 2014, a company called Money Runners
Group began tweeting high praise for a small company called GrowLife,
Inc. (traded under the ticker PHOT) that specialized in providing supplies
and logistics support to marijuana farmers. At the time of their
first tweet on December 20, 2013, the stock was valued at $0.14 per share – by January 9, 2014, it
had more than tripled in value and was valued at $0.47. Less than two
weeks later, the stock closed at $0.19.
Afterwards, Money Runners switched to posting on Facebook to continue proclaiming
PHOT as the next great investment. Within a week, the stock’s value
shot back up It didn’t take long for the United States Securities
and Exchange Commission (SEC) to take notice – the regulatory body
lodged a civil complaint in August of 2014, alleging that Christopher
Mwroca and Mikhail Galas, the men behind Money Runners, bought millions
of shares of PHOT stock, along with five other stocks, and worked behind
the scenes to make them appear to be active and highly-traded stocks by
purchasing each other’s shares and transferring shares between multiple
brokerage accounts. According to the SEC, Mwroca made $165,700 from the
PHOT stock alone, and Mwroca, Galas, and two other associates made around
$2.5 million in total through their scheme.
Investors need to be wary of any unsolicited stock tips. Some red flags
suggesting a possible pump-and-dump scheme include:
Constantly pressuring you to take advantage a limited time offer. High-pressure sales tactics are a tell-tale sign of potential fraud.
Never purchase a stock from anyone who is pressuring you to make a quick decision.
Hiding their identity. If you can’t verify the identity of the person pushing the sale,
then what’s to say they’re a reputable source? If they claim
to be a legitimate broker, it should be easy for them to prove their credentials.
There are multiple tools available to verify their claims, including the
Financial Industry Regulatory Authority’s (FINRA) BrokerCheck.
Difficulty retrieving information about the stock. Small companies may not have enough publicly available information available
for you to make an informed decision. Their stocks, commonly referred
to as “penny stocks,” also tend to be highly volatile in price.
If you think you’ve been the victim of a pump-and-dump scam, contact
the investment fraud attorneys at Meyer Wilson. They have successfully
represented over 1,000 investors and recovered hundreds of millions of
dollars through verdicts and settlements on behalf of their clients.
Fill out our online form to begin your free case consultation today.