Investor's Watchdog.com: Stock, finance and investment protection for investors

The U.S. Securities and Exchange Commission has charged Summit Advisory Partners and its managing partner, Robert Feeback with directing an illegal pump and dump scheme.  According to the SEC, the scheme allowed three stock promoters, Ryan Reynolds, Jason Wynn and Carlton Fleming, to make millions by purchasing shares cheap, hyping the companies with false press releases, and then selling to the public at inflated prices.

As we have written about before, pump and dumps are especially insidious because the market itself plays a major role. People believe in the integrity of the stock markets, that market prices reflect the value that knowledgeable sources put on the companies behind the stocks.  Pump and dump schemes feed inaccurate information to the market.  Those involved often trade stocks back and forth between dummy accounts to make it look as if there is broad interest in the stocks involved, that many people are buying.  Victims draw the conclusion that many knowledgeable investors judge the company’s press release to be genuine and that the company is therefore poised for a sharp increase in value.  It is all a mirage.

The best way to avoid a pump and dump scheme is to know as much as possible about the broker who is trying to sell you the stock of this supposed up-and-comer.  Ask a knowledgeable investigator to tell you the truth behind the pitch and you might just save your nest egg.