A surge in pump-and-dump schemes is alarming New York stock traders, with complaints jumping 330% over the past year, according to data obtained by CBS News New York Investigates. These schemes involve scammers buying shares of cheap stocks and then using social media and other platforms to convince others to invest, artificially inflating the stock's value. Once the price is high enough, the scammers sell their shares for a significant profit, leaving other investors with plummeting values.
Two New York traders recently recounted losses of tens of thousands of dollars to CBS News as a result of these schemes. One trader from Peekskill reported losing $74,000 after following investment advice from a social media account that led him to a WhatsApp chat with a supposed financial guru. Another individual from Long Island lost $96,000 in the MSGY stock crash. Victims are sometimes afraid to come forward due to fear of intimidation by the scammers.
KPMG Managing Director D. J. Hennes notes that the rise in these schemes is partly due to the increasing number of people investing in the stock market, particularly with the popularity of day trading apps like Robinhood. The Securities and Exchange Commission (SEC) Chairman Paul Atkins has stated that the SEC is taking steps to protect investors and prevent pump-and-dump schemes.
These schemes highlight the vulnerability of individual investors, especially those new to day trading, to stock market manipulation. Experts recommend investors exercise caution when considering unsolicited investment advice and to conduct thorough research before investing in unfamiliar stocks. Stronger regulatory oversight and investor education are crucial to combating these predatory practices.
