The stock market in New York is the natural venue for a great many scams. As an investor, it will be up to you to do all that you can to spot and avoid them. This will require vigilance on your part as well as a knowledge of what to look for. This foresight will help to keep you safe from falling prey to stock fraud.
Pump and dump scams
One of the most common forms of financial fraud that can take place on the New York Stock Exchange is the classic pump and dump scam. This is a coordinated scheme whose point is to artificially boost the price of a particular stock. This can be done through a variety of means.
The usual method is to do so through a series of false or misleading statements.
You will often see hyperbolic claims made on behalf of a particular stock on social media platforms. You can also receive anonymous “tips” on messaging apps such as Telegram and Discord. If they sound too good to be true, stay away.
Always be on the lookout for a scam
It will be up to you to stay vigilant in order to spot the signs of an impending pump and dump. You can do this by spotting the different stages of the pump and dump trend. A great deal of hype, rumors, and unverified claims will be made concerning a particular stock. Its value will then begin to rise.
Once enough shares of the stock have been bought to cause its price to skyrocket, the bottom will suddenly drop out. This is because the people who caused the rise of this stock will sell it. They walk away richer while the marks are left holding the bag.