Earlier this week, Andrei Tyurin, a Russian hacker pleaded guilty in federal court to wire fraud, bank fraud and conspiracy to commit computer hacking. The charges stemmed from a number of large data breaches done by Tyurin including, most notably the 2014 data breach of JP Morgan Chase customers in which Tyurin obtained the names, phone numbers and email addresses of 83 million of JP Morgan Chase’s customers. Turin’s cohorts then used this information to contact these people to tout penny stocks in a classic pump and dump scam. Penny stocks are low-priced, thinly traded stocks that are often used as the tool for scammers to take advantage of unwary investors. Because they are so thinly traded, scammers are able to manipulate the prices so that they temporarily are able to artificially inflate the price of the stock and then sell shares they purchased at low values thereby achieving a huge profit. Scammers manipulate the stock market through telephone calls, emails, chat rooms, social media and news releases touting the stock as a great investment. Often they purport to have inside information about a huge increase in the value of the stock that is about to occur. Sometimes, the victims of this communications barrage receive emails that appear to have inside information indicating the stock is about to sharply rise. These communications lure unsuspecting investors into buying the stock and thereby for a short period raise the value of the stock. The scammers then sell their stock at the manipulated high price. When the truth becomes known, the value of the stock shares plummet and the investors are left with tremendous losses. This scam is called “pump and dump.”
Investing is always risky and investing in penny stocks is particularly risky. Any investment is only as good as the information upon which the investment is made. Never make an investment without reliable information gleaned from legitimate, reliable sources. Always be skeptical of purported insider information which is not only unreliable, but also can be illegal to trade upon.
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