Investors Warned of Scams Conducted Over Messaging Apps
The Financial Industry Regulatory Authority and Meyer Wilson want investors to be aware of the recent popularity of stock scams occurring over messaging apps. Investors should be aware of any unsolicited emails promoting penny stocks. Fraudsters are now targeting victims through messaging apps such as WhatsApp to trap unsuspecting individuals in pump-and-dump schemes.
FINRA has seen recent spikes in spam messages on WhatsApp, where users are encouraged to invest in penny or “microcap” stocks. Microcap stocks are characterized by their low total value of the whole company.
Some things to be aware of microcap stocks:
- There is generally little information available to the public about the companies. This makes them more susceptible to fraud.
- They do not have a minimum for listing standards.
- Microcap stock companies are generally riskier. These companies tend to be newer, thus lacking the established track record of bigger, wider known stock firms.
If you are working with a broker, advisor, or firm, it might be helpful to ask them for more information about prospective microcap companies.
Scammers are using these microcap companies as a vessel to scam investors. Stockholders were recently solicited to invest in AVRA Inc., through WhatsApp. The fraudsters pretended to be connected to well-established firms. When introducing themselves, they typically only used first names. Finally, these scams offered investors high returns on stocks, claiming they only had a limited number available.
Messaging app scams like these are related to pump-and-dump schemes. These schemes are when stocks are initially sold because of false promises. Because customers buy the stocks so quickly, it pumps their value. The scammers then sell all their stocks at the peak price value. Swiftly thereafter, the prices of the stocks plummet, leaving them to be worthless or very nearly so.
We at Meyer Wilson want you to be well prepared when investing in any form of stocks. This is why we warn you from hastily investing in stocks that seem too good to be true. If you receive unsolicited messages through messaging apps, we recommend that you ignore or delete them. If you would like to know more about your legal rights when it comes to investments, contact our experienced investment fraud attorneys today!