Last week, our team posted a blog regarding a pump-and-dump scheme involving Jammin’ Java. The alleged scheme resulted in charges brought down by the Securities and Exchange Commission (SEC) against Jammin’ Java’s former CEO, Shane Whittle, who was accused of secretly gaining control of millions of shares in the company’s stocks then spreading them to three offshore entities. According to the allegations, the stocks were later dumped on the public as soon as the prices increased following fraudulent campaign promotions.
FINRA has since provided tips to help investors understand the signs of a pump-and-dump and avoid becoming a victims. These tips can be beneficial in your future investments.
According to FINRA, investors should do the following:
- Be aware of the source. Understand the company and be aware of fraudulent press releases or promotional material. If you notice a company promoting only upside and do not mention the potential risks, this could be a red flag.
- Do your research. Looking into the owner of the company, who is in control, and who else may be involved. A quick search may give you the answers you need to proceed with caution. In the case of the Jammin’ Java scheme, two of the involved individuals had previous SEC charges.
- Look out for reverse mergers. This may be a sign of pump-and-dump schemes because it allows private companies to merge with public shell companies.
- Understand the trading process. Where does the stock trade? Many of the pump-and-dump schemes people encounter have involved low-priced and thinly traded stocks. These are often not on the New York Stock Exchange, The NASDAQ Stock Market, or other registered securities exchanges.
- Analyze SEC filings. A large majority of public companies submit SEC filings. Some companies do not because their stocks are traded in an over-the-counter market. Checking this database will help verify if a legitimate company is handling the stocks.
At Meyer Wilson, we are well aware of the situations behind pump-and-dump schemes. We want to protect investors from losses due to this fraudulent behavior. If you have lost money due to a pump and dump, call our securities fraud attorneys today for your free case evaluation and learn how we may be able to help you.
Need to know more about pump and dump schemes? Watch our video below.