Other LanguagesScammers and overall ne’er-do-wells have been capitalizing off tragedy and disaster in one form or another since the dawn of time. While trying events bring out the best in most, the worst in some also slinks to the surface.
The U.S. Securites Exchange Commission issued a warning regarding a stock scam that is morally troublesome – with a slight dusting of irony. The warning is meant to alert investors about “pump and dump” stock scams by companies claiming to have (or be in the process of obtaining) contracts with BP or government agencies pertaining to oil spill in the Gulf of Mexico. One company in particular, ACT Clean Technologies, Inc., of Huntington Beach, Calif., had trading of its shares suspended after the SEC questioned the validity of the company’s claims regarding the use of its “oil fluidizer” in the affected areas of the Gulf.
As with most pump and dump schemes, companies are using a variety of avenues to build false momentum for these stocks; from press releases to Twitter posts and everything in between. As more investors are scammed, the price is “pumped” up. Once the early investors believe the stock price cannot go any higher, they “dump” their stocks onto the open market - usually with them making off with a tidy sum - and the price plummets.
According to the warning, here are the red flags to look out:
- Claims to have products or technologies that are effective in remediating oil spills or restoring the eco-system.
- Mention of contracts or expected contracts with BP (formerly British Petroleum) that will aid the cleanup effort.
- Claims that the company is providing technical assistance or expertise to BP or to U.S. government agencies such as the Coast Guard or the Environmental Protection Agency.
- Predictions of rapid, exponential sales growth.
- Pressure to invest immediately.
Concisely put: If it sounds too good to be true, it probably is.
Please report suspicious offers to the Securities Exchange.
- Darius Schwarz, Public Affairs Intern