The 2016 election brought the term fake news into headlines and into American’s living rooms. Both sides alleged that there were “fake news campaigns” working to spread news that was meant to sabotage their campaign.
With the growing use of social media to spread news stories and share information with friends, it’s absolutely true that fake news has become more common in recent years, whether it’s just poorly researched opinion based news, or actual news set up to scam or misinform readers.
One of the most dangerous examples of fake news comes in the form of pump and dump schemes. Like all types of fake news, Pump and dump schemes have been around since the beginning of time, but they have recently made a new (and dangerous) comeback in the form of digital media.
How Do Pump and Dump Schemes Work?
Imagine you have a stock that is low in value. You want to “dump” it, but you need someone to buy it from you.
No one is going to do that, at least not for the price you want. So you use fake marketing to convince investors that your stock is worth more than it is, because the price is about to skyrocket.
Essentially, you make them think that they have discovered secret, inside information and that it will pay off if they invest in the stock.
You “pump” the internet with news, “pump” up the price of your stock, and then “dump” it on an unassuming investor who didn’t do proper research.
What Pump and Dump Schemes Look Like Today
In the past, pump and dump schemes were run by fake investors making cold calls to convince investors that they had the next big secret on a valuable stock.
Today, pump and dump schemes are far less personal. They come in the form of spam emails, facebook posts, and any other form of online marketing that tries to convince a receipient to “act fast” in order to take advantage of a “unique opportunity.”
Protecting Yourself From Pump and Dump Schemes
Knowing that these schemes are out there can be unsettling and make you feel like there is a heightened risk whenever you decide to invest. Although pump and dump schemes are real concerns, there are measurable actions you can take to protect yourself from falling victim to such a scheme and keep your money safe.
The first thing to keep in mind is to beware of any information you read over the internet. It is no joke that we are living in the age of “fake news” anyone and everyone can post pages online, and they can even create fake “source” news articles that they link to in their posts to establish false credibility. If you are trying to conduct financial research online, stick to reputable sources.Even with reputable sources, double check to make sure that the page is not a fraud.
The next step is to consult a local financial advisor or private investigator before committing to the investment. Meeting with someone locally face to face who you can trust to verify if the investment is really a good idea will be worth your weight in gold. We don’t always have the knowledge or resources to detect pump and dump schemes on our own, but there are people out there who can help you.
The last step is to never feel pressure to jump into an investment. Pump and dump schemes play off of a person’s sense of urgency. When we feel like we are being offered a limited time opportunity, we act impulsively and don’t think things through the way we would if we felt that we had time. The reality is, no investment is worth it if you don’t have time to thoroughly research it and make sure it is legitimate. If you are feeling like you need to rush, it probably is too good to be true.
It is harder than ever to protect yourself online, with scammers getting smarter, and real, reliable information getting harder and harder to get a hold of. But take your time, think things through, and don’t be afraid to consult an expert when you’re getting ready to make a big decision. Your bank account will thank you for it.