One of the most common Internet frauds involves the classic pump and dump scheme. Here's how it works: A company's web site may feature a glowing press release about its financial health or some new product or innovation. Newsletters that purport to offer unbiased recommendations may suddenly tout the company as the latest "hot" stock. Messages in chat rooms and bulletin board postings may urge you to buy the stock quickly or to sell before the price goes down.

Unwitting investors then purchase the stock in droves, creating high demand and pumping up the price. But when the fraudsters behind the scheme sell their shares at the peak and stop hyping the stock, the price plummets, and investors lose their money.  Fraudsters frequently use this ploy with small, thinly traded companies because it's easier to manipulate a stock when there's little or no information available about the company. 

STEER CLEAR OF POTENTIAL SCAMS AND INVESTIGATE BEFORE YOU INVEST

Consider the Source
When you see an offer on the Internet, assume it is a scam, until you can prove through your own research that it is legitimate. And remember that the people touting the stock may well be insiders of the company or paid promoters who stand to profit handsomely if you trade.

Find Out Where the Stock Trades
Many of the smallest and most thinly traded stocks cannot meet the listing requirements of the Nasdaq Stock Market or a national exchange, such as the New York Stock Exchange. Instead they trade over-the-counter and are quoted on OTC systems, such as the OTC Bulletin Board or the Pink Sheets. Stocks that trade in the OTC market are generally among the most risky and most susceptible to manipulation.

Independently Verify Claims
It's easy for a company or its promoters to make grandiose claims about new product developments, lucrative contracts, or the company's financial health. But before you invest, make sure you've independently verified those claims.

Research the Opportunity
Always ask for  the prospectus or current financial statements. Check the SEC's EDGAR database to see whether the investment is registered. Some smaller companies don't have to register their securities offerings with the SEC, so always check with your state securities regulator.

Watch Out for High-Pressure Pitches
Beware of promoters who pressure you to buy before you have a chance to think about and fully investigate the so-called "opportunity." Don't fall for the line that you'll lose out on a "once-in-a-lifetime" chance to make big money if you don't act quickly.

Always Be Skeptical
Whenever someone you don't know offers you a hot stock tip, ask yourself: Why me? Why is this stranger giving me this tip? How might he or she benefit if I trade?

Please note that OldStocks.com does not sell investments or investment advice.  It is highly recommended that you contact a registered investment professional for these services.   Items sold in our catalog are cancelled or obsolete, and only sold as collectible items.