Claris Law Legal Blogging Community

Editor: Debra G. Speyer, Esq.
Profession: Attorney

Category: Fraud in the News

Investors - Beware of Internet postings. You never know who is really posting them and whether they are true.
Scam artists often post false information about companies on chat room or stock message board to push up the stock of a company that the scam artist has purchased for much less per share with the hope that people reading the false postings will purchase the shares and the stock price of that company will rise. That is called market manipulation and it is illegal. The underlying company that the scam artist is manipulating may be very legitimate and that company may not know why all of a sudden its stock has doubled in price. Market manipulation is easier with low priced thinly traded stock.

The Securities and Exchange Commission has charged two men, Zafar and Sameer Thawani with a pump-and-dump scheme that earned them $873,000 in profits since 2004. In one instance, the men purchased 83,600 shares of Lucille Farms-a small cheese maker and then posted to the web that there was talks that the cheese maker was to merge with Kraft. The stock jumped 70% before sinking down again. Investors-beware