Don't let fraudsters get their hands on your money by avoiding these latest share scams.
Where there is money fraudsters will somehow find a way to get their hands on it. Last week, this article looked at the way that scammers use the Internet to perpetrate an insidious form of pump-and-dump fraud via emails. Essentially, con artists pump up the price of a chosen share by despatching millions of emails indiscriminately in the hope that some recipients will buy the shares. Then they dump the shares and reap a handsome profit in the process.
Now, fraudsters have added a new twist to their spam scam. They are so convinced of their pump-and-dump scheme that they are now offering their services to companies to help boost their share prices for a fee. This new form of fraud was uncovered by Sophos, which helps companies protect their email servers.
It seems that fraudsters have told companies that they can improve their share price by up to 250% in just a matter of weeks. Additionally, companies don't have to pay anything in advance. According to emails intercepted by Sophos, the fraudsters will only ask for payment once the share price has risen and the volume of shares traded has increased. But the resourcefulness of the fraudsters doesn't stop there. The scammers said they can also provide potential investors with advance warning of companies that will be "pumped".
And just when you though it couldn't get any worse -- it does. Sophos has uncovered a pump-and-dump campaign in which scammers use animated graphics to display a subliminal message to potential investors.
The way this works is that subliminal messages that only last a fraction of a second are embedded in emails and websites. These messages may contain a "BUY" command that is unlikely to be detected by the conscious brain, though it may be registered by the subconscious mind. The idea is that it may subconsciously influence you to buy a share that you may not otherwise have considered.
Thing is, there is no evidence that subliminal advertising works. Market researcher James Vicary claimed in 1957 that he successfully boosted the sales of Coca-Cola and popcorn in cinemas by flashing up subliminal images during a movie. But five years later he admitted that it was a fabrication.
While subliminal advertising is an interesting topic, its effectiveness is perhaps a matter for psychologists to decide. But as far as private investors are concerned, investing on a whim is never a good idea. There is no substitute for in depth research, and the only way to that is to sit down and study the fundamentals of the business thoroughly.
And as far as pump-and-dump is concerned, it goes without saying that if something is too good to be true - it probably is.
Listen to our podcast on Boiler Rooms, Bucket Shops and Share Scams here.
