Home » Investing » Top 5 greatest penny stock scams
Drowning in credit debt?

Top 5 greatest penny stock scams

PennyStocksPenny Stocks also branded as Cent stocks in UK; in fact they are ordinary shares of small public companies that operate at near to the ground prices per share. In United States, Security Exchange defines penny stock as a security that is traded below the rate of $5 per share. It is also not scheduled on a nationalized exchange and fails to assemble other explicit criteria. In United Kingdom, stocks priced below 1 Pound are called Penny Shares. In the case of many penny stocks, near to the ground market price unavoidably escort to low market capitalization. Such stocks can be highly unstable and question to exploit the stock promoters by pump and dump schemes. Such stocks present jeopardy for investors who are often surrounded by wish of outsized and rapid profits. Penny stocks in USA are often operated over-the-counter. In United States, the Securities & Exchange commission and Financial Industry Regulatory Authority (FINRA) have precise regulations to classify and legalize the retailing of penny stocks. Top 5 penny stocks according to me in terms of loss and external factors are put in plain words here.


  1. Microcap Stock SCAM by Pump & Dump

Microcap stock fraud is a form of securities con involving stocks of public companies by and large distinct in US as those with the market capitalization of less than $250 million. Microcap stock fraud has been investigated in quite a few books & movies. A book that walks around microcap fraud was the book “Born to Steal” by Gary Weiss in 2003. It portrays the trick of 1990s from beginning to end of a juvenile broker named Louis and same setting was described in the well-known movie Wolf of Wall Street. Stratton Oakmont was a brokerage house and shut down in late 1990s by the regulators. It was run by Jordan Belfort who was also jailed for scam & that was due to pump and dump schemes. Pump and dump schemes are essentially that from first to last misleading the market, dishonest brokers and analysts unnaturally pump the prices of the stocks and influence inexperience investors to buy their stocks. When the price of share climbs amply, these offenders still keep on endorsing the stocks as they sell their shares for profit now. This amplified selling grounds the share price to go down so that naive investors are beaten not only by stocks but huge amounts as well. Close to US$ 10 billion was the scam in this case. It is one of the famous and huge in numbers so mentioned on the top of the list.



  1. Pure Diarrhea SCAM by Short & Distort

A very celebrated market analyst Anthony Elgindy frequently sent his readers a comical analysis of penny stocks. His unique and innovative ways brought in a faithful following and he was making a large amount, close to $1.6 million annually from his research. He possesses a Hummer, Ferrari & Mercedes Benz. It was a dream of penny stock existence. The most significant thing is that today Mr. Anthony is spending 9 years in prison. Anthony and his subscribers were constructing currency by short-selling penny stocks in which it allows you to profit as share price cascade. In fact the thing is that the short-selling is totally legal but now the story goes into scam. Fundamentally he was paying dishonest agents of FBI to open inquiries into penny stock companies he was short-selling. The mania was that the moment investigations were made public, share price would plunge. That was the point for Anthony making profit at the cost of naive shareholders. This is the reverse of pump and dumps and is famous as short and distort.

  1. Russian Hackers SCAM

In the early 2000s, A 21 year old US citizen banked $13,158 in just 104 minutes by exchanging of penny stocks. The true story is something else. This man was supposedly part of an Eastern European mob of computer hacking and spot theft to cheat childlike investors. Using his private brokerage account he acquired 43,000 shares of a penny stock, Thomas Equipment. According to SEC complaint, in the next 1 ½ hour he hacked other people’s brokerage accounts and acquired 149,000 more shares of Thomas Equipment. This twice the small stocks share price and permitted the hackers to sell their position for almost a revisit of 100%. This rip-off is called hack, pump and dump. John Reed of SEC depicts this as “You wake up in the morning and all your blue chips are vanished so now you own a microcap stock that is almost worthless.” This scam is on the rise as cybercrime is touching sky. In this case, brokerage accounts were all hacked and those made the hack, pump and dump a cake walk for the hackers. The monetary numbers of this scam never came in media.

  1. Never GOLD SCAM

In December 1993, unaccompanied man travelled profound into the Borneo Jungle and discovered the world’s biggest gold reserves. Analysts projected that there could be as much as 71 million ounces which turns out to be worth of $130 billion at today’s gold price. Shares of the small penny stock with claim to this find, Bre-X Minerals appeared its max out price of $300. The shareholders at once became millionaires.  Geologist Michael De Guzman became not just a multi-millionaire but a celebrity in few days. The fame and fortune was short-term. The inside story was that there was no gold even not 1 ounce. He fooled everyone. In 1998, US miner Freeport McMoran found trivial amount of gold almost close to zero. Michael De Guzman was call upon to explain himself but he is unable to finish the road till today as we are reading this. He threw himself from a helicopter someplace above the jungle and he never reached his destiny. After a couple of days, the news of his death was made public and the news of gigantic scam hit the market. The next minute, share price of Bre-X collapsed. One shareholder lost his life savings of $800,000, his friend who had advised him to invest in these penny stocks committed suicide. In sum, investors lost a total of US$ 6 billion. This all started from a single penny stock but SCAM.

  1. FREE Penny Stock Scam

This kind of work is not illegal but scam is a scam after all. The time a new person wants to learn about penny stock and writes it onto the search engine that is the time the trick starts happening with you. You’ll probably click on the links that are attractive and also located at the top as it is a natural phenomenon. You’ll likely end up on a website that offers you the free email alerts on top & hottest stock picks. The website will have testimonials & a track record of recent pick tools. One will definitely think that he / she is getting free penny stock recommendations and that too from such a verified source. Thousands of people stuck in this scam now. Remember one thing here that there is no such thing as a free lunch in this world. If anyone says you this, that is the time to hold your wallet and run away as far as you can. Many of these believed newsletters are in fact paid penny stock promoters. That means plainly that penny stock companies who want to lift up money pay these marketers to endorse their stocks and also drive up their share price. So these newsletters live to serve their paying clients, the penny stock companies & not the free subscribers. The price of the share goes out of bed and when the hype show off the share price normally drops down to normal where it belonged to. This is a scam now, as the majority of people are doing this to bury as much as they can to wrap the real data by saying free subscription to the users and readers. This is difficult to measure in numbers as it is happening everyday but still important to mention and that is the reason for being at the last in the list.

About Emaad Qureshi