Call Now For a Free Consultation:
(614) 532-4576
Nationwide Representation

Don't Fall Prey to Digital "Pump and Dump" Scams

Pump-and-dump scams, also known as boiler room scams, used to rely on cold calls as a way to artificially increase the price of a stock and take advantage of unsuspecting investors.

Nowadays, scammers also utilize social media, websites, and press releases. In one case back in late 2013 and early 2014, a company called Money Runners Group began tweeting high praise for a small company called GrowLife, Inc. (traded under the ticker PHOT) that specialized in providing supplies and logistics support to marijuana farmers. At the time of their first tweet on December 20, 2013, the stock was valued at $0.14 per share – by January 9, 2014, it had more than tripled in value and was valued at $0.47. Less than two weeks later, the stock closed at $0.19.

Afterwards, Money Runners switched to posting on Facebook to continue proclaiming PHOT as the next great investment. Within a week, the stock’s value shot back up It didn’t take long for the United States Securities and Exchange Commission (SEC) to take notice – the regulatory body lodged a civil complaint in August of 2014, alleging that Christopher Mwroca and Mikhail Galas, the men behind Money Runners, bought millions of shares of PHOT stock, along with five other stocks, and worked behind the scenes to make them appear to be active and highly-traded stocks by purchasing each other’s shares and transferring shares between multiple brokerage accounts. According to the SEC, Mwroca made $165,700 from the PHOT stock alone, and Mwroca, Galas, and two other associates made around $2.5 million in total through their scheme.

Investors need to be wary of any unsolicited stock tips. Some red flags suggesting a possible pump-and-dump scheme include:

  • Constantly pressuring you to take advantage a limited time offer. High-pressure sales tactics are a tell-tale sign of potential fraud. Never purchase a stock from anyone who is pressuring you to make a quick decision.
  • Hiding their identity. If you can’t verify the identity of the person pushing the sale, then what’s to say they’re a reputable source? If they claim to be a legitimate broker, it should be easy for them to prove their credentials. There are multiple tools available to verify their claims, including the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck.
  • Difficulty retrieving information about the stock. Small companies may not have enough publicly available information available for you to make an informed decision. Their stocks, commonly referred to as “penny stocks,” also tend to be highly volatile in price.

If you think you’ve been the victim of a pump-and-dump scam, contact the investment fraud attorneys at Meyer Wilson. They have successfully represented over 1,000 investors and recovered hundreds of millions of dollars through verdicts and settlements on behalf of their clients. Fill out our online form to begin your free case consultation today.

Related Posts:

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation
Atlanta Office

945 East Paces Ferry Road, Suite 2275
Atlanta, GA 30326
Columbus Office

614-224-6000
305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

310-905-8688
2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

216-600-1355
4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

248-817-8214
41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram