On June 12, 2013 FINRA and the SEC issued an Investor Alert titled “Inbox Alert—Don’t Trade on Pump-And-Dump Stock Emails,” warning investors of a sharp increase in email-linked “pump-and-dump” stock schemes.

FINRA and the SEC’s joint Alert noted that the latest McAfee Threats Report confirms a steep rise in spam email linked to bogus “pump-and-dump” stock schemes designed to trick unsuspecting investors. These false claims could also be made on social media such as Facebook and Twitter, as well as on bulletin boards and chat room pages.

Pump-and-dump promoters frequently claim to have “inside” information about an impending development. Others may say they use an “infallible” system that uses a combination of economic and stock market data to pick stocks. These scams are the “inbox” equivalent of a boiler room sales operation, hounding investors with potentially false information about a company.

The fraudsters behind these scams stand to gain by selling their shares after the stock price is “pumped” up by the buying frenzy they create through the mass email push. Once these fraudsters “dump” their shares by selling them and stop hyping the stock, investors lose their money or are left with worthless, or near worthless, stock.