It is very necessary for a penny stock investor to know about main penny stock frauds, so that he should be able to save his investment from frauds.
The most common penny stock fraud is pump and dump while the converse of a Pump and Dump is one more penny stock fraud that is known as the Poop and Scoop. In this fraud the manipulators spread the wrong negative rumors about the stock and the company, for the purpose to drive the price downward.
One more penny stock fraud is Front Running; here the news in reality is true and not any false rumor, but the insiders of the stock issuing company take great positions ahead of the news becoming public. If insiders are involved in news spread, this is also referred to as insider trading, and is illegal.
Another common penny stock fraud is Circular Trading. Using multiple accounts, trading the same shares back and forth, between insiders own accounts are known as circular trading. When there is no trading activity and the stock price is down for a long period, then this fraud is performed in order to create the appearance of activity.
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