Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, April 23, 2007

NASD Warns of China Stock Pump and Dump Schemes

NASD is warning investors to be wary of faxes, emails and even cell phone text messages touting low-priced "China" stocks of companies that often have no affiliation with China or its stock markets.  A new NASD Investor Alert - "China" Stocks-Look Beyond the Name Before You Invest - explains how fraudsters entice investors to purchase bogus stocks that promise exponential price growth. One fax promoted a purported China stock with the headline, "Grabbing massive profits in China has never been easier than right now!" It went on to promote a company whose shares were "ripe to pop" for "a low price that's unheard of, and quite temporary." The fax urged investors to "load up on the stock now!" Fraudsters use these efforts to pump up the stock's price, then sell off their shares, usually leaving investors with a stock valued at much less than when they purchased it.

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