What is Penny Stock Fraud?
Stocks, or shares, are a type of security that denote ownership in a corporation. The holder of a stock owns a claim to a percentage of the corporation’s earnings and assets. Penny stocks are stocks that normally trade for under $1, often for under a penny. They are poorly regulated and penny stock fraud has become so prevalent a colorful vocabulary has sprung up in response. The most common penny stock fraud is the Pump and Dump. A small group of speculators will accumulate a large number of shares in a penny stock. Once their positions are in place, they will release positive financial porn, news so unexpected and titillating it can drastically affect people’s perception of the stock. The intent is to get small-time investors to start trading irrationally. The news is almost always false, but before this is discovered, the price of the stock often skyrockets and the original speculators exit with large profits. The converse of a Pump and Dump is a penny stock fraud called the Poop an
