Chat app WhatsApp may be a new breeding ground for pump-and-dump scammers.
The Financial Industry Regulatory Authority (FINRA) warned investors yesterday (Sept. 2) about a surge in fraudsters using messaging apps like WhatsApp to distribute deceptive messages to users.
According to FINRA, WhatsApp users have been flooded with messages in recent weeks that look as though they are from individuals at well-known brokerage firms but actually contain misleading stock information.
Scammers allegedly sent messages claiming the Avra stock was “going to double in the next few days,” in hopes that unsuspecting users would act on the information. This type of spam is reportedly used to induce buying before shares are then sold at their peak.
A news release from FINRA explained: “This latest scam is a variation of the pump-and-dump scam, where fraudsters use spam — in this case transmitted through the mass message push feature of messaging apps — to tout a stock. The buying that follows will ‘pump’ up the price — until the fraudsters ‘dump’ their shares by selling them at a peak. In the end, investors lose their money or are left with worthless, or near worthless, stock.”
On Aug. 21, Avra shares saw an incredible rise and eventual fall within the span of less than two hours, CNBC reported, confirming the Avra stock was at $0.17 at 10:20 a.m. ET, spiked to $0.94 by 11 a.m. then plunged to $.30 by 11:20 a.m.
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While FINRA did not elaborate on exactly when the scam took place, the drastic changes in stock price may be connected to the false messages that were distributed to WhatsApp users.
“Scammers keep up with the times. If you are using a messaging app and receive a tout claiming that a stock is poised for explosive growth, don’t respond — just delete,” Gerri Walsh, SVP of investor education at FINRA, said.