The Case of the Phony Faxes
Hot Stock Tip, Anyone?
The Case of the Phony Faxes
11/20/06
Fax machines around the nation were humming the week before Christmas ‘04, with a series of mysterious messages spitting out by the tens of thousands.
Anyone who bothered to take a close look at one of the faxes—and plenty apparently did—noticed something strange. The message was addressed to a “Dr. Mitchel” and came from a financial planner named simply “Chris.” Clearly the wrong number.
But the message itself was intriguing. It was all about a hot stock that “Chris” wanted the good doctor to buy immediately. One of the mystery faxes went like this:
But one thing he didn’t figure on: getting caught. The press got wind of the faxes and published stories, which caught the eye of the Securities and Exchange Commission, or SEC. The SEC opened an investigation, tracing the fax calls to a Florida company, and we soon began investigating as well. We conducted interviews, searched computers for evidence, and gained enough information to arrest Pickens, who was charged by prosecutors along with a fellow stock promoter.
On October 30, Pickens pled guilty to three felony counts of securities fraud. He faces up to twenty years in prison when sentenced on January 30.
How can you keep from being duped by such a scam? A few suggestions:
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Don’t take the bait on faxes and e-mails that appear personalized and lead you to believe you are inadvertently receiving a hot tip on little-known stocks;
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Be especially suspicious of one-page “tout sheets” or e-mails making outlandish claims that a stock will double or triple in the near future and that contain disclosures in small print referencing payment by an “unaffiliated third party”;
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Beware of stocks that change their names frequently, have reverse share splits, or are topics of frequent news releases that can’t be independently verified—all signs of scam artists at work.
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