You can read more about the risks of these scams and their warning signs in Interactive Brokers’ Risk Disclosure Regarding Ramp and Dump Scams, andAdd recent guidance from FINRA, the SFC, and IFEC.
Here are some key points:
Be skeptical
- In the virtual world, fraudsters can easily disguise themselves.
- Be skeptical of the identities of anyone you meet online, particularly if they claim to be an investment advisor or celebrity.
- Be especially vigilant when offered unsolicited investment advice by online "friends."
Pay attention to warning signs
Below are some red flags that may be signs of a scam, including ramp-and-dump scams:
- Unsolicited investment advice.
- Substantial share price increase without positive news about the company.
- Suggestions to purchase small cap stock with low liquidity, especially if many of the shares are held by a small group.
- Your online "friend" asks you to send a screenshot of your trading record.
Do your homework
- Many of the stocks recommended by the operators of these scams were overvalued and there was no obvious justification for their prices to surge.
- Investors are strongly advised to do their own homework on a company before investing in it, or seek independent advice from licensed investment advisors.
Be wary of investments that sound too good to be true
- If an investment sounds too good to be true, it often is.
- Remember that there is no such thing as a low-risk investment with high guaranteed returns - a claim frequently used by fraudsters to entice unwary investors by manipulating their fear of missing an opportunity.
- Interactive Brokers does not provide investment or trading advice, and so cannot advise you about what products you should or should not trade.