By David Maillie

If you have an email address and get junk mail then you have probably received a few pump and dump email scams.  If you haven’t or don’t know what one is, it’s basically a email that announces some penny stock will greatly increase soon and that you should buy now. 

The purpose being these pump and dump campaigns is to drive up the price of the stock temporarily and then sell and take the quick profits.  The bad thing is that the campaign operators and backers already have their money in the stock and they will sell while you are buying.  When you go to buy you will be part of the influx causing it to go up and will not be able to sell in time before it crashes.

This is why its termed pump and dump – buy low, get others to buy with scammy emails that basically lie about the stocks growth potential or similar, and then sell before it crashes.  All pump and dumps will crash due to the unfounded reasons for the quick growth.  These crashes can leave investors crushed especially in penny stocks where the crash can be 70% of the stocks value or more in just a day or two.

The way these scammy pump and dump operators get investors attention is through millions of spam mails.  Many times they will not even originate in the U.S. and sometimes they even come from a bot (someone else’s virus infected computer that is sending these emails unbeknownst to them). 

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Basically it’s a numbers game for pump and dumpers.  For every 1,000 to 10,000 emails one person succumbs and invest their hard earned money in this scheme.  So, if they can get 10 million pump and dump spam emails out there to valid email addresses, they could easily get 1,000 or more victims to invest and raise the price of the stock artificially. 

Now, obviously, this will not work on large stocks that are actively traded in huge volumes, but that is why they stick with the penny stocks and the OTCBB or pink slips of trading.  These companies are so small and their prices so low that 1,000 buyers could cause the stock to easily gain 40-60% or more in just a few days.  And that is where the pump and dumpers make their money and big returns.

It is pretty simple to spot a spammy pump and dump email and many good email programs like Yahoomail have spam protection that will just direct these emails to your bulk folder for deletion.  However, the pump and dump masterminds are getting smarter and finding ways to bypass the spam filters to reach you with their scams.  So, stay aware and never take investment advice from an unsolicited email.