Pump and dump. You may have heard of this pernicious stock fraud. Pump and dump even made the national news recently when the famous rapper 50 Cent came under criticism for hyping a little known company called H&H Imports. 50 sent his followers on Twitter messages about what a great stock H&H was and the price of H&H stock nearly tripled in a few hours. What 50′s tweets didn’t mention was that he owned 30 million shares of H&H.
50 also failed to mention the sections in H&H’s prospectus that would make any wise investor wary. The prospectus says that the company is not making money and may never make money, that the company needs to grow to make money and doesn’t know if they are capable of managing that growth, and that company management has limited experience. The prospectus also mentions that investors may not be able to sell their stock later.
Does that sound like a good investment? It would not to a stock loss attorney.
No one really knows why 50 Cent was shilling H&H stock, but it illustrates the pump and dump pattern, and shows how easy to is to pump and dump in the internet age. Scammers used to use call centers and junk mail campaigns to work their schemes, but the internet has made it very easy to use social media tools to pump up the value of worthless stocks – even without the help of a celebrity like 50 Cent.