Messaging Apps Being Used in Pump and Dump Scheme
As technology continues to improve and new methods for communication become widespread, scammers will continue to find new ways to convince potential investors to invest in their fraudulent schemes. In this latest incident, perpetrators used the popular messaging platform WhatsApp to convince unwitting investors to purchase stock in Avra, a digital currency technology creator.
What is a “Pump and Dump” Scheme?
A “pump and dump” scheme is a form of stock fraud that involves artificially inflating the price of a stock by disseminating false information designed to lure investors into buying stock, which is usually priced quite low. A successful pump and dump occurs when unwitting investors purchase the stock, thus driving the price of the stock up. At some point after the stock has been artificially inflated, the perpetrators sell their stock at the inflated price for a profit and leave investors holding the bag.
The Recent “Pump and Dump” Scheme
In this instance, scammers used WhatsApp to convince users to buy Avra stock before dumping their shares at a higher price, according to FINRA. Some app users received messages purporting to come from employees of well-known brokerage firms stating that the stock price was going to “double in the next few days.”
The scammers in this case acted fairly quickly. On the morning of Aug. 21, the shares were sold for 17 cents at 10:20 a.m. By 11:00 a.m., the price jumped more than 500% percent to 94 cents per share. By 11:20 a.m., the shares dropped to 30 cents, indicating that the scammers sold their stake, flooded the market and drove the price back down, all within the span of one hour.
Call a Los Angeles Stockbroker Attorney Today
If you have received a similar message or purchased stock in what turned out to be a “pump and dump” scheme, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles stockbroker lawyer today for a consultation regarding your rights.