The Federal Bureau of Investigation issued a warning recently regarding an ongoing stock scam that can cause significant financial damage to victims. The agency says it has seen at least a 300% increase in calls from people saying they were scammed in “ramp-and-dump” stock fraud schemes.
The schemes involve scammers making unsolicited contact with targets through social media and text messages advertising “investment clubs.” The club offers investment advice that encourages users to buy specific stocks. The target however, is unaware that the people behind the scam own a large volume of the stocks.
As more people are convinced to buy the stock, it drives up the price. Once the stock price is artificially elevated, the scammers sell their stock at a profit, but the other investors can lose their money as the stock price falls following the scammers’ sale.
The FBI says you can protect yourself from becoming a victim of the scam by recognizing the following indicators:
- Unsolicited investment tips received via “accidental” text messages or social media advertisements linking to online investment clubs, often hosted on secure messaging apps.
- Claims from well-known financial advisors or wealth managers offering exclusive stock recommendations through these online clubs.
- Pressure to act quickly based on a supposed market-moving event — such as a company breakthrough, new technology, or government approval.
- Urgent pitches to purchase low-priced stocks in new or emerging companies, often paired with promises of dramatic price increases or guarantees to cover any investor losses.
“If anyone requests your personal information, access to your financial account(s), or offers a financial benefit in exchange for sharing your information or opening an account, consider this a red flag; your information could be used to open an account through which another party can engage in manipulative activity,” the FBI warning reads.
If you or someone you know is or may have been a victim of the scam, you are asked to report it to the FBI Internet Crime Complaint Center (IC3) as soon as possible.
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