Penny stock scams are no longer limited to unsolicited boiler room phone calls. Penny stock scammers lurk everywhere and nowadays, even on social media sites.

Penny Stock Scams


In 2010 the SEC obtained an emergency asset freeze against a Montreal-based couple, for fraudulently promoting penny stocks through their website, on Facebook and Twitter. Boasting that they were No. 1 in the business, was sending out daily email alerts and text messages.


Just as they were heavily recommending the stocks, they were also selling their shares in the open market, in a practice known as scalping. The two scammers had received free shares from the companies they were touting as compensation and according to the SEC, had realized at least $2.4 million from their scalping schemes.


As the SEC explains it, there’s nothing wrong with their making money as long as their transactions were disclosed to investors, which they weren’t.

Chronology of A Penny Stock Scam


Here is how ran their scam. Between May and June 2009, the couple touted a Utah-based property company firm, Converge Global, four times.


The following information is extracted from the SEC lawsuit:


  •  On May 11, 2009, the website published, “[Converge} – Last @ .022 – Up 16% on Friday  – Ready to Move Higher…[Converge} has the potential to jump 500%”


  •  On May 4 2009, the website stated, “[Converge] shares rose over 400% since our last alert. We recommended [Converge] to our members at $.022 and [Converge] closed yesterday at $.13. This was up 490%.”


  •  On June 1, 2009, the website published, [Converge] shares moved from our recommendation at $.02 to a high of $0.44 that is a 2100% increase”


  • Later, on June 13 2009 The website touted “[Converge] IS WAY TO LOW [sic]..{Converge} IS ON NEWS ATCH!!  [Converge] is on our watch list for a 100%-300% move.”


During the course of their promotional campaign, the share price, which had previously ranged between 1.9-2.2 cents a share, moved to almost 4 cents a share. Volume jumped more than 50x to 16 million shares daily. But while they were promoting the stock, the couple was busy selling stock during that time to raise more than $600,000 in proceeds.


Other cases are mentioned in the SEC lawsuit but this is just to give you an idea of how penny stock scams work. Here is a link to full details of the SEC lawsuit.


How To Avoid Penny Stock Scams


here are some simple suggestions to help you avert from dangerous penny stock scams:


  1. Don’t fall for an email alert, tweet or Facebook post of an impending, explosive stock price increase, no matter how convincing it sounds. Stock prices of solid companies don’t increase 10x over a period of a few days or weeks. This should be a red flag for you, be diligent in recognizing potential penny stock scams.


  1. Ignore hype on the message boards. Question where they are getting their information from.


  1. Even if a report is issued by a so-called investment research firm, check to see if the firm has been paid to make a positive recommendation


  1. Check out solid investigative websites such as The Street Sweeper ( They are the ones which ran an expose on


  1. Conduct your own research or refer to established websites with a defined and proven track record.  Why trust in the opinions of others?


  1. Just because someone has a professional looking website does not make them credible. These days a small visually appealing website can be made in a matter of hours, and anyone could be running a variety of penny stock scams.


  1. The penny stock market can be a dangerous place to venture due to the lack of reporting requirements and the manipulation of information regarding a company’s performance or future development. If you still wish to navigate these stocks, you must remain on your toes and be very careful to avoid penny stock scams.

Penny Stocks

Pump And Dump Scams

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