Securities Law Prof Blog

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

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Tuesday, October 23, 2007

FINRA Warns Investors About Energy Stock Frauds

FINRA issued an Investor Alert today warning investors to be wary of energy-related stock "pump-and-dump" scams that entice investors to purchase stocks that promise exponential price growth.

The new Investor Alert, "Save Your Energy and Money—Don't Fall for Energy Stock Scams," explains these energy stock scams typically involve small unknown companies, using a combination of baseless price predictions, misrepresentations and hyperbole. The goal of these scams is to inflate the price of the stock through false and misleading statements that create unwarranted demand for the company's shares. The con artists behind the scam can then sell off their shares, leaving investors with worthless stock.

The Alert warns investors about fax, email and even cell phone text message scams that promise high returns in exchange for little risk. In a spam message, one outfit trumpets that a certain Texas energy firm has "teamed up with China's $23 billion oil monopoly," and promises that huge returns are in store for those with the wisdom and foresight to invest 'RIGHT NOW!'

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