Anyone who has been online more than a few days has seen advertisements for websites that claim to be able to help you make major profits off of penny stocks. They often ask you to sign up for their email where they will shoot out the ‘hottest penny stock tips’ as they become available. While most people seem to be aware that these types of get rich quick schemes are never as good as they sound, apparently there are many who are still desperate enough to get scammed.
Eight marketers have been indicted by the Manhattan District Attorney, New York State, on charges that they have defrauded thousands of investors out of over $290 Million. The time period cited in the case is from April 2009 to May 2012. The eight people are accused of using email marketing to send out ‘stock tips’ on low priced stocks that they believed were poised to be ready to make big gains.
While there is nothing illegal about this on the surface, the trouble comes when it was discovered that these people had already owned the stocks they were promoting. They would buy in big on low priced stocks, send out their email blast to thousands of investors who would then go in and drive the price up. Once it peaked, the marketers would sell their shares and hold on to the profits, leaving the investors with a vastly overpriced stock.
Essentially this is a digital pump and dump, which is illegal.
The companies that were involved with these scams were Smart Holdings Inc, Hydrogenetics Inc., Lyric Jeans Inc., Xynergy Holdings Inc., Blast Applications Inc., Blue Gem Enterprise Inc., Mass Hysteria Entertainment Company Inc., Recycle Tech Inc., and Sunpeaks Ventures. Anthony Thompson, 38, Eric Van Nguyen, 30, and Jay Fung, 40 – are accused of working with five others from April 2009 to May 2012 to drive up prices of penny stocks to induce investors to buy shares.
They promoted their supposed expert investment tips through sites like FreeInvestmentReport.com, PennyPic.com, OxofWallStreet.com and MonsterStox.com. When I attempted to access these sites while writing this story, they were all unavailable, presumably due to something related to this case.