Pump and Dump Stock Scam of the Weekend: SCXN

by on Apr.21, 2013, under Security

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Author: Wiz

April 21, 2013

Since Friday, April 19, 2013, I have received over two dozen email spam messages touting a penny stock with the initials SCXN. The purpose of these emails is to pump up interest in this stock and get as many new investors as possible to buy into it on Monday, before it crashes.

Once a predetermined price has been reached, the people already holding the majority of the shares, who also created this scheme, will cash out (dump), leaving all of the other later investors holding stock worth much less than they paid for it.

In order to try to fool spam filters, the authors add an underscore between varying letters in the symbol of the stock being spammed. So, instead of seeing the full abbreviation: SCXN, you would see S_CXN, or SC_XN, or SCX_N. No legitimate email message from a real adviser would need to try to trick spam filters in this manner.

Pump and Dump scams have been around for many years and used to be sent out by newspaper and direct mail advertisements. But, with the popularity of the Internet and availability of cheap spam email services, based in Belarus, Kazakhstan, The Ukraine, Russia, Bulgaria and Latvia (to name but a few), these schemes can be sent to tens of millions of potential dupes for a several hundred dollars.

If you have multiple email accounts and they are already on spam databases, you will receive similar spam messages in each account. Or, if you have just one email account, you will certainly see multiple versions of the current pump and dump promotion on the same weekend. The spammers send multiple messages to the same or related accounts in order to drum up as much illicit profit as possible, in the shortest time. This is because the spam runs usually happen on the weekend, while the stock exchanges are closed. When trading opens on Monday morning, the people who got tricked into investing into the stock scam of the weekend will pour money into penny stocks.

Volume is as important as price to the scammers running these schemes. High volumes of activity on Mondays can give false confidence to some holdouts and cause them to join the feeding frenzy. Once the original stock holders see the price rise to the agreed upon mark, they all cash out at the same time. This causes the value of the remaining stock to drop quickly. By the time trading has halted, these stocks are often trading at a few cents above the starting price that existed at the open of the trading day.

A few days later, the prices drop to lower levels as the last of the duped investors try to sell their almost worthless stocks at the current low price, or simply abandon them. These folks are the big losers, like everybody else who gets taken in by a Ponzi Scheme.

Here are some references I have found that you should read before you invest in any stock being promoted through any media, that has a value below $1.00.

Things any potential investor should do (due diligence) include:

  1. Fully research the company and its top executives. Do they have civil or criminal convictions on record?
  2. Look for signs of previous pump and dump campaigns that suddenly inflated the price of the stock before it flat-lined again.
  3. Look for real (not spammed) news releases to justify sudden inflated trading prices.
  4. Study the articles I listed above to help you to identify a scam, by the words, or phrases used in the messages.
  5. Learn to read the headers in email messages, so you can trace the location of the sender of any email message. Why would an American stock adviser be sending you email from a personal computer located in Belarus?
  6. Finally, if you are contemplating getting knowingly involved in a pump and dump stock scheme, read this artice to see what one outcome may be for the people who perpetrated the FrogAds pump and dump stock campaigns. Note the 2nd to last paragraph, which reads: “If the lower-ranking accused scammers are found guilty, they’ll face 100-year sentences. But if the ringmasters are found guilty, they could get life.”

You are ultimately responsible for your own security and the security of your money and investments. Don’t let greed or sudden excitement cause you to lose focus.

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