MAMDMD3b:
Determine, represent, and analyze
mathematical models for income,
expenditures, and various types of
loans and investments
How are stock scams perpetrated?
Penny Stocks
• Recall that penny stocks are attractive
investements because they are:
– Cheap
• Easy to purchase a large quantity of
– Have the chance for large gains.
Large Gains?
• Recall stock shares are the value of a
company.
• It is easier for a $5 million company to become
a $10 million company.
• Than for a $500 million company to become a
Billion dollar company.
Sooo….
• If my one share of stock can go from 1 cent to
2 cents that is a 100% gain.
• If my one share of stock can go from $50 to
$100 that is a 100% gain.
• Which seems easier to accomplish?
Lets watch a video that makes
penny stocks look like free money.
Scam Time
Pump and Dump
• Aggressively promoting a stock to drive up the
price, before everyone sells off and the stock
loses all it’s perceived growth.
• Message Boards
• Fake income statements
• Fake leaked “insider info”
Anatomy of a Pump and Dump
Video
Here is a scam that
your teacher fell for
Sponge Tech
• A company that nobody every really heard of
that is based in New York.
• They make sponges with soap built right in.
• April 2009 – Selling at 2 cents a share.
April 2009
Sponge Tech
• Within about 4 months, it went from a
company nobody had ever heard of to
seemingly everywhere
Sponge Tech Videos
• Infomercial
• Spongebob Commercial
• WXIA
• Mets Game
May 2009
ESPN.COM ARTICLE
Sports Business Journal ARTICLE
Message Board Article
Early June 2009
In thousands of dollars
6/2009 6/2008
Mid June 2009
And the bottom drops out… video
20 years in slammer