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Microcap stock fraud is a form of securities fraud involving stocks of "microcap" companies, generally defined in the United States as those with a market capitalization of under $250 million. Its prevalence has been estimated to run into the billions of dollars a year.
In business and investing, term microcap stock (also micro-cap) refers to the stock of public companies in the United States which have a market capitalization of roughly $50 million to $250 million. The shares of companies with a market capitalization of less than $50 million are typically referred to as nano-cap stocks.
In microcap fraud, stocks of small companies of under $250 million market capitalization are deceptively promoted, then sold to an unwary public. This type of fraud has been estimated to cost investors $1–3 billion annually. [19] Microcap fraud includes pump and dump schemes involving boiler rooms and scams on the Internet.
This is an accepted version of this page This is the latest accepted revision, reviewed on 17 January 2025. There is 1 pending revision awaiting review. Form of securities fraud For other uses, see Pump and dump (disambiguation). "Night wind hawkers" sold stock on the streets during the South Sea Bubble. (The Great Picture of Folly, 1720) Pump and dump (P&D) is a form of securities fraud that ...
Stocks traded on these markets are usually thinly traded microcap or penny stocks. Both retail and institutional investors generally avoid them, because of fears that share prices are easily manipulated and the potential for fraud. The SEC issues stern warnings to investors to be aware of common fraud and manipulation schemes.
Following is a list of securities frauds (also called stock frauds or investment frauds): 2003 Mutual-fund scandal: A number of major brokerages and mutual fund firms were accused of various deceptive acts that disadvantaged customers. Among them were late trading and market timing. Various SEC rules were enacted to curtail this practice. [1]
Many of the stocks traded OTC are microcap stocks, also known as penny stocks, which are known for fraudulent microcap stock fraud and penny stock scams. [ 29 ] After the passage of Sarbanes-Oxley Act in 2002, some companies delisted and became OTC to save costs and avoid certain regulations, although OTC companies have faced pressure to ...
When the liquidity and price increase, the manipulator will sell their stock — known as a "pump and dump" scheme — which is a form of microcap stock fraud. On April 3, 2017, the Federal Bureau of Investigation (FBI) reported on a story in which penny stock fraud was the focal point of the piece. According to the article ...