162:. Volatility is "a statistical measure of the dispersion of returns for a given security or market index". Typically, the higher the volatility, the greater the risk in investing in said securities. Conversely, the lower the volatility, the "safer" the investment is. Volatility can be also understood as the frequency of large changes in the value of a given security in either direction. This is directly correlated to the price action of a security which, when talking about penny stocks, can change more rapidly than that of a large-cap stock.
27:
270:, fake press releases, or e-mail blasts to drive up interest in the stock. Very often, the perpetrator will claim to have "inside" information about impending news to persuade the unwitting investor to quickly buy the shares. When buying pressure pushes the share price up, the rise in price entices more people to believe the hype and to buy shares as well. Eventually the manipulators doing the "pumping" end up "dumping," when they sell their holdings.
103:, a financial instrument which represents a given financial value, issued by small public companies that trade at less than $ 5 per share. Penny stocks are priced over-the-counter, rather than on the trading floor. The term "penny stock" refers to shares that, prior to the SEC's classification, traded for "pennies on the dollar". In 1934, when the United States government passed the
251:(FBI) reported on a story in which penny stock fraud was the focal point of the piece. According to the article, California resident Zirk de Maison was found guilty of conducting a "pump and dump" scheme, during the course of which de Maison and his associates convinced large groups of investors to purchase shares of companies that he had set up as shell organizations.
328:
Another example of an activity that skirts the borderline between legitimate promotion and hype is the case of LEXG. Lithium
Exploration Group's market capitalization soared to over $ 350 million after an extensive direct mail campaign. The promotion drew upon the legitimate growth in production and
273:
The expanding use of the
Internet and personal communication devices has made penny stock scams easier to perpetrate. Since the Securities & Exchange Commission allowed for the use of social media outlets like Twitter to disclose public information in lieu of press services, many fraudsters have
258:
According to the FBI investigation, de Maison would use fictitious names to convince investors to purchase shares of his shell companies, thus driving up the price of his shares and giving the illusion that investors were realizing profit. Once these prices went up, de Maison and his original
214:. A common practice is for these individuals to purchase large quantities of stock and then utilize promoters to artificially inflate the sub-penny stock’s share price, through false and misleading information. When the liquidity and price increase, the manipulator will sell their
205:
There are inherent concerns that individuals should be aware of when investing in penny stocks, namely the lack of information that often exists surrounding the companies offering said stocks. The lack of public reporting mixed with a thin market is often the perfect recipe for
254:
From 2008 to 2013, de Maison created five small public companies which, unbeknownst to the investing public, did no actual business and had no legitimate assets. Once he set these companies up, he offered public shares of the company’s penny stocks for investors to purchase.
337:(filed within months of the direct mail promotion), LEXG was a lithium company without assets. Its revenues and assets at that time were zero. Subsequently, the company did acquire lithium production/exploration properties, and addressed concerns raised in the press.
418:
These regulations proved effective in closing or greatly restricting broker/dealers, such as
Blinder, Robinson & Company, which specialized in the penny stocks sector. Meyer Blinder was jailed for securities fraud in 1992, after the collapse of his firm.
107:
to regulate any and all transactions of securities between parties which are "not the original issuer", the SEC at the time disclosed that equity securities which trade for less than $ 5 per share could not be listed on any national stock exchange or
182:, so holders of shares in penny stock companies often find it difficult to cash out of positions. However, academic research shows that the risk created by small market cap size and lower liquidity results in higher expected returns due to the
286:
had infiltrated Wall Street by the 1970s. In the 1980s
Lorenzo Formato conducted penny-stock manipulations. Formato testified in Congressional hearings that during the years he promoted and sold penny stocks, he was involved in
174:
say that fraud is widespread in the penny stock market. Potential fraud that involves even what are considered very small or micro market cap companies can still involve losses of tens of millions of dollars.
386:
Although penny stock trading in the United States is now primarily controlled through rules and regulations enforced by the SEC and FINRA, the genesis of this control is found in State securities law. The
324:
associate, for conspiring to commit securities fraud with stock broker Joseph DiBella and Robert
Cattogio to inflate the price of penny stock "First Colonial Ventures". All three defendants pled guilty.
411:
at the time, was principal sponsor of the bill in the House of
Representatives. Georgia's penny stock law was subsequently challenged in court. However, the law was eventually upheld in
259:
conspirators would then liquidate their shares at the stock's highest level, and this mass selling caused the shares to drop dramatically, leaving investors with near-worthless shares.
415:, and the statute became the template for laws enacted in other states. Shortly thereafter, both FINRA and the SEC enacted comprehensive revisions of their penny stock regulations.
343:
One of the biggest penny stock operators in the 1950s was
Tellier & Co. In the 1980s, major penny stock brokerages included Blinder Robinson (nicknamed "Blind'em and Rob'em"),
274:
set up accounts to take advantage of this higher level of traffic on social media, giving investors another thing to consider when searching for viable sources of information.
383:-listed securities which traded below $ 1.00 during the market downturn of 2008–09, while properly regarded as "low-priced" securities, were not technically "penny stocks".
151:
When considering penny stocks, investors and experts in the field recognize the low market price of shares and its correlation to low market capitalization.
371:, regardless of price, are exempt from regulatory designation as a penny stock, since it is thought that exchange-traded securities are less vulnerable to
158:
Since penny stocks are inexpensive, investors often buy large quantities of shares without spending much money. This tendency makes the penny stock market
764:
1232:
359:
In the United States, regulators have defined a penny stock as a security that meets a number of specific standards. The criteria include price,
340:
The "pump and dump" tactic is also known as a supernova and, unlike regular stocks, penny stocks usually move on momentum of the price action.
37:
1002:
587:
613:
1027:
955:
1209:
689:
194:
128:
96:
262:
In more sophisticated versions of the fraud, individuals or organizations buy millions of shares, then use newsletter websites,
1042:
333:, while touting Lithium Exploration Group's position within that sector. According to the company's December 31, 2010, form
842:
435:
977:
1188:"1/3/14: Commissioner enters Order in Georgia Commerce Bancshares, Inc.'s fairness proceeding under O.C.G.A. §10-5-11(9)"
819:
558:
647:
623:
298:
By 1989, American investors were being cheated out of at least $ 2 billion a year by schemes involving penny stocks.
71:
791:
248:
171:
104:
399:, whose office enforced State securities laws, was a principal proponent of the legislation. Representative
1073:
933:
765:"Eight people sentenced to prison for penny-stock fraud that resulted in $ 39 million loss to investors"
1162:
531:
120:
295:
by organized crime. The
Congressional hearings led to passage of the Penny Stock Reform Act of 1990.
1259:
739:
408:
53:
455:
1264:
155:
or "market cap" is the total dollar market value of all of a company’s outstanding securities.
140:
347:, Rooney Pace, and Stuart-James. Major penny stock brokerages operating in the 1990s included
1279:
360:
152:
139:, including foreign securities exchanges. Penny stocks can include the securities of certain
674:
321:
241:
159:
8:
864:
412:
372:
207:
480:
1051:
392:
306:
292:
124:
100:
1098:
506:
619:
400:
344:
301:
Mob activity on Wall Street reportedly increased in the 1990s. On
February 10, 1997,
187:
132:
45:
16:
Common shares of small public companies that trade for less than one dollar per share
1139:
388:
348:
49:
1187:
903:
317:
310:
288:
441:
1115:
368:
283:
211:
136:
92:
1273:
865:"SEC Says Social Media OK for Company Announcements if Investors Are Alerted"
714:
267:
226:
197:(FINRA) have specific rules to define and regulate the sale of penny stocks.
88:
183:
135:, formerly known as Pink OTC Markets Inc.). Penny stocks can also trade on
404:
396:
364:
109:
376:
263:
179:
796:
652:
1028:"Great frauds in history: Meyer Blinder's Blind 'em & Rob 'em"
734:
732:
305:
reported that "Mafia crime families are switching increasingly to
1140:"SEC Charges Eight Participants in Penny Stock Manipulation Ring"
330:
1074:"SEC Settlement : Rooney Pace Halting Securities Business
729:
588:"Inside One of the U.S.'s Biggest-Ever Investment-Fraud Stings"
395:
a comprehensive penny stock securities law. Secretary of State
1099:
Penny Stock Dealer Stuart-James, Executives, Appeal
Sanctions
615:
Trusted Criminals: White Collar Crime In Contemporary Society
36:
deal primarily with the United States and do not represent a
956:"Lithium Exploration Group: Beware of Mailmen Bearing Gifts"
904:"SEC Testimony: Organized Crime on Wall Street (R. Walker)"
687:
380:
334:
690:"Common risk factors in the returns on stocks and bonds"
351:, Sterling Foster, A.S. Goldmen, and Hanover Sterling.
320:
led to charges against Louis Malpeso Jr., a reported
1116:"SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 240"
95:that trade for less than one dollar per share. The
1003:"Con Artist Hall of Infamy : Walter Tellier"
928:
926:
924:
898:
896:
894:
892:
890:
888:
886:
1271:
934:"Witness Tells of Mob Influence in Penny Stocks"
792:"The $ 400 million buyout hoax that fooled many"
581:
579:
99:(SEC) uses the term "Penny stock" to refer to a
559:"Mob-Busting Informant Resurfaces in SEC Probe"
1040:
921:
883:
1210:"GEORGIA LAW WON'T HURT BROKERS, JUDGE RULES"
1043:"Meyer Blinder, Penny Stock King, Dies at 82
576:
123:exchanges that list penny stocks include the
34:The examples and perspective in this article
840:
789:
871:. U.S. Securities & Exchange Commission
688:Fama, Eugene; French, Kenneth (July 1992).
1163:"Georgia to OK Tough Law for Penny Stocks"
611:
1230:
1080:. Articles.latimes.com. November 17, 1987
822:. Financial Industry Regulatory Authority
717:. U.S. Securities and Exchange Commission
585:
556:
200:
72:Learn how and when to remove this message
1233:"Penny-Stock Fraud, From Both Sides Now"
1231:HENRIQUES, DIANA B (February 16, 2003).
437:Penny stock definition oxford Dictionary
195:Financial Industry Regulatory Authority
97:U.S. Securities and Exchange Commission
1272:
1160:
612:Friedrichs, David O. (June 25, 2009).
193:In the United States, the SEC and the
146:
936:. Associated Press. September 8, 1989
817:
645:
309:" with a focus on "small Wall Street
131:) or OTC Link LLC (which is owned by
648:"Former Mob Snitch All But Indicted"
20:
712:
557:Eaglesham, Jean (August 17, 2015).
504:
13:
1265:Nasdaq: The Perils of Penny Stocks
1113:
790:Staff Writer (November 26, 2012).
367:. Securities traded on a national
178:The penny stock market has little
14:
1291:
1253:
740:"Penny Stock Fraud Nets Millions"
646:Davis, Blayne (August 25, 2015).
460:LII / Legal Information Institute
456:"Securities Exchange Act of 1934"
291:, and testified to rampant penny
1041:Douglas Martin (March 4, 2004).
586:Eaglesham, Jean (July 7, 2014).
277:
25:
1224:
1202:
1180:
1161:Darden, Stan (March 20, 1990).
1154:
1132:
1107:
1092:
1066:
1034:
1020:
995:
978:"Lithium Exploration Group Inc"
970:
948:
857:
834:
811:
783:
757:
744:Federal Bureau of Investigation
706:
681:
667:
249:Federal Bureau of Investigation
172:Federal Bureau of Investigation
143:with no active trading market.
1260:Nasdaq: What are Penny Stocks?
841:Harry Domash (June 12, 2000).
639:
605:
550:
524:
498:
473:
448:
428:
1:
1212:. Deseret News. July 11, 1990
958:. Seeking Alpha. May 10, 2011
481:"SEC.gov | Penny Stock Rules"
422:
354:
1007:archive.pixelettestudios.com
7:
843:"Internet Makes Scams Easy"
48:, discuss the issue on the
10:
1296:
845:. San Francisco Chronicle
635:– via Google Books.
713:SEC (January 11, 2005).
532:"What is a Penny Stock?"
409:Georgia General Assembly
165:
127:(which is a facility of
115:
391:was the first state to
345:First Jersey Securities
133:OTC Markets Group, Inc.
105:Securities Exchange Act
247:On April 3, 2017, the
201:Concerns for investors
944:– via LA Times.
361:market capitalization
153:Market capitalization
618:. Cengage Learning.
322:Colombo crime family
316:In May 1997, an FBI
242:microcap stock fraud
170:Prosecutors and the
137:securities exchanges
54:create a new article
46:improve this article
715:"Pump&Dump.con"
675:"Liquidity Premium"
592:Wall Street Journal
563:Wall Street Journal
413:U.S. District Court
379:(NYSE:C) and other
307:white collar crimes
240:which is a form of
147:Risk and investment
1078:November 17, 1987"
1052:The New York Times
771:. January 31, 2017
365:shareholder equity
303:The New York Times
293:stock manipulation
208:stock manipulation
188:liquidity premiums
125:OTC Bulletin Board
1114:Taylor, J. Lynn.
1076:Los Angeles Times
820:"Spams and Scams"
505:Kuepper, Justin.
401:Chesley V. Morton
141:private companies
82:
81:
74:
56:, as appropriate.
1287:
1248:
1247:
1245:
1243:
1228:
1222:
1221:
1219:
1217:
1206:
1200:
1199:
1197:
1195:
1184:
1178:
1177:
1175:
1173:
1158:
1152:
1151:
1149:
1147:
1136:
1130:
1129:
1127:
1125:
1120:
1111:
1105:
1101:Associated Press
1096:
1090:
1089:
1087:
1085:
1070:
1064:
1063:
1061:
1059:
1038:
1032:
1031:
1030:. December 2020.
1024:
1018:
1017:
1015:
1013:
999:
993:
992:
990:
988:
974:
968:
967:
965:
963:
952:
946:
945:
943:
941:
930:
919:
918:
916:
914:
900:
881:
880:
878:
876:
861:
855:
854:
852:
850:
838:
832:
831:
829:
827:
815:
809:
808:
806:
804:
787:
781:
780:
778:
776:
761:
755:
754:
752:
750:
736:
727:
726:
724:
722:
710:
704:
703:
701:
699:
694:
685:
679:
678:
671:
665:
664:
662:
660:
643:
637:
636:
634:
632:
609:
603:
602:
600:
598:
583:
574:
573:
571:
569:
554:
548:
547:
545:
543:
528:
522:
521:
519:
517:
502:
496:
495:
493:
491:
477:
471:
470:
468:
466:
452:
446:
445:
440:, archived from
432:
389:State of Georgia
349:Stratton Oakmont
311:brokerage houses
239:
238:
234:
224:
223:
219:
121:Over-the-counter
93:public companies
77:
70:
66:
63:
57:
29:
28:
21:
1295:
1294:
1290:
1289:
1288:
1286:
1285:
1284:
1270:
1269:
1256:
1251:
1241:
1239:
1229:
1225:
1215:
1213:
1208:
1207:
1203:
1193:
1191:
1186:
1185:
1181:
1171:
1169:
1159:
1155:
1145:
1143:
1138:
1137:
1133:
1123:
1121:
1118:
1112:
1108:
1103:October 9, 1996
1097:
1093:
1083:
1081:
1072:
1071:
1067:
1057:
1055:
1039:
1035:
1026:
1025:
1021:
1011:
1009:
1001:
1000:
996:
986:
984:
976:
975:
971:
961:
959:
954:
953:
949:
939:
937:
932:
931:
922:
912:
910:
902:
901:
884:
874:
872:
863:
862:
858:
848:
846:
839:
835:
825:
823:
816:
812:
802:
800:
788:
784:
774:
772:
769:www.justice.gov
763:
762:
758:
748:
746:
738:
737:
730:
720:
718:
711:
707:
697:
695:
692:
686:
682:
673:
672:
668:
658:
656:
644:
640:
630:
628:
626:
610:
606:
596:
594:
584:
577:
567:
565:
555:
551:
541:
539:
538:. March 9, 2021
530:
529:
525:
515:
513:
503:
499:
489:
487:
479:
478:
474:
464:
462:
454:
453:
449:
444:on May 12, 2021
434:
433:
429:
425:
357:
318:sting operation
289:organized crime
280:
236:
232:
230:
221:
217:
215:
212:stock promoters
203:
168:
149:
118:
78:
67:
61:
58:
43:
30:
26:
17:
12:
11:
5:
1293:
1283:
1282:
1268:
1267:
1262:
1255:
1254:External links
1252:
1250:
1249:
1237:New York Times
1223:
1201:
1179:
1153:
1131:
1106:
1091:
1065:
1047:March 4, 2004"
1045:New York Times
1033:
1019:
994:
982:New York Times
969:
947:
920:
882:
856:
833:
818:FINRA (2012).
810:
782:
756:
728:
705:
680:
666:
638:
625:978-0495600824
624:
604:
575:
549:
523:
497:
472:
447:
426:
424:
421:
369:stock exchange
363:, and minimum
356:
353:
279:
276:
268:message boards
202:
199:
167:
164:
148:
145:
117:
114:
80:
79:
40:of the subject
38:worldwide view
33:
31:
24:
15:
9:
6:
4:
3:
2:
1292:
1281:
1278:
1277:
1275:
1266:
1263:
1261:
1258:
1257:
1238:
1234:
1227:
1211:
1205:
1189:
1183:
1168:
1164:
1157:
1141:
1135:
1117:
1110:
1104:
1102:
1095:
1079:
1077:
1069:
1054:
1053:
1048:
1046:
1037:
1029:
1023:
1008:
1004:
998:
983:
979:
973:
957:
951:
935:
929:
927:
925:
909:
905:
899:
897:
895:
893:
891:
889:
887:
870:
866:
860:
844:
837:
821:
814:
799:
798:
793:
786:
770:
766:
760:
745:
741:
735:
733:
716:
709:
691:
684:
676:
670:
655:
654:
649:
642:
627:
621:
617:
616:
608:
593:
589:
582:
580:
564:
560:
553:
537:
533:
527:
512:
508:
501:
486:
482:
476:
461:
457:
451:
443:
439:
438:
431:
427:
420:
416:
414:
410:
406:
402:
398:
394:
390:
384:
382:
378:
375:. Therefore,
374:
370:
366:
362:
352:
350:
346:
341:
338:
336:
332:
326:
323:
319:
314:
312:
308:
304:
299:
296:
294:
290:
285:
278:Notable cases
275:
271:
269:
265:
260:
256:
252:
250:
245:
243:
228:
227:pump and dump
213:
209:
198:
196:
191:
189:
185:
181:
176:
173:
163:
161:
156:
154:
144:
142:
138:
134:
130:
126:
122:
113:
111:
106:
102:
98:
94:
90:
89:common shares
86:
76:
73:
65:
62:February 2024
55:
51:
47:
41:
39:
32:
23:
22:
19:
1280:Stock market
1240:. Retrieved
1236:
1226:
1214:. Retrieved
1204:
1192:. Retrieved
1182:
1170:. Retrieved
1166:
1156:
1144:. Retrieved
1134:
1122:. Retrieved
1109:
1100:
1094:
1082:. Retrieved
1075:
1068:
1056:. Retrieved
1050:
1044:
1036:
1022:
1012:November 14,
1010:. Retrieved
1006:
997:
985:. Retrieved
981:
972:
960:. Retrieved
950:
940:November 14,
938:. Retrieved
913:November 14,
911:. Retrieved
907:
875:December 16,
873:. Retrieved
868:
859:
847:. Retrieved
836:
824:. Retrieved
813:
801:. Retrieved
795:
785:
773:. Retrieved
768:
759:
747:. Retrieved
743:
721:November 21,
719:. Retrieved
708:
696:. Retrieved
683:
669:
659:November 14,
657:. Retrieved
651:
641:
631:November 14,
629:. Retrieved
614:
607:
597:November 14,
595:. Retrieved
591:
568:November 14,
566:. Retrieved
562:
552:
542:September 7,
540:. Retrieved
535:
526:
514:. Retrieved
511:Investopedia
510:
507:"Volatility"
500:
488:. Retrieved
484:
475:
463:. Retrieved
459:
450:
442:the original
436:
430:
417:
385:
373:manipulation
358:
342:
339:
327:
315:
302:
300:
297:
281:
272:
261:
257:
253:
246:
225:known as a "
204:
192:
177:
169:
157:
150:
119:
85:Penny stocks
84:
83:
68:
59:
35:
18:
1084:January 15,
1058:January 15,
908:www.sec.gov
485:www.sec.gov
405:stockbroker
403:, the only
397:Max Cleland
1242:January 4,
1216:January 4,
1194:January 4,
1172:January 4,
1146:January 4,
1124:January 4,
987:January 4,
803:January 4,
536:Warsoption
423:References
355:Regulation
264:chat rooms
1190:. Ga. SoS
962:March 30,
490:March 25,
377:Citigroup
180:liquidity
91:of small
50:talk page
1274:Category
1167:LA Times
849:June 15,
826:July 29,
797:NBC News
653:HuffPost
266:, stock
160:volatile
101:security
44:You may
869:SEC.gov
775:June 3,
749:June 3,
698:July 8,
516:June 3,
465:June 3,
407:in the
331:lithium
329:use of
237:
233:
222:
218:
622:
393:codify
231:scheme
1142:. SEC
1119:(PDF)
693:(PDF)
284:Mafia
216:stock
166:Fraud
129:FINRA
116:Trade
110:index
52:, or
1244:2014
1218:2014
1196:2014
1174:2014
1148:2014
1126:2014
1086:2019
1060:2019
1014:2018
989:2014
964:2012
942:2018
915:2018
877:2020
851:2006
828:2012
805:2014
777:2020
751:2020
723:2006
700:2021
661:2018
633:2018
620:ISBN
599:2018
570:2018
544:2021
518:2020
492:2019
467:2020
381:NYSE
335:10-Q
282:The
210:via
186:and
184:size
87:are
313:."
1276::
1235:.
1165:.
1049:.
1005:.
980:.
923:^
906:.
885:^
867:.
794:.
767:.
742:.
731:^
650:.
590:.
578:^
561:.
534:.
509:.
483:.
458:.
244:.
229:"
190:.
112:.
1246:.
1220:.
1198:.
1176:.
1150:.
1128:.
1088:.
1062:.
1016:.
991:.
966:.
917:.
879:.
853:.
830:.
807:.
779:.
753:.
725:.
702:.
677:.
663:.
601:.
572:.
546:.
520:.
494:.
469:.
235:—
220:—
75:)
69:(
64:)
60:(
42:.
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.