Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Twitter Social Media Stock Scams Could Put Your Money at Risk

Companies / Scams Mar 13, 2013 - 03:15 PM GMT

By: Money_Morning

Companies

David Zeiler writes: Social media stock scams - the use of tools like Twitter to spread misinformation to manipulate equities - is one more thing for retail investors to worry about.

A series of incidents over the past several months have put social media stock scams on the radar screens of the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the Federal Bureau of Investigation (FBI).


While securities fraud is an old problem, stock scams conducted via social media are more capable of causing maximum damage because of the rapid speed at which information spreads over social networks.

"Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes," Robert B. Kaplan, co-chief of the SEC Enforcement Division's Asset Management Unit, told the Financial Times. "Social media is no exception."

And you don't have to act on the misinformation yourself (such as acting on a false stock tip to buy a penny stock in a "pump-and-dump" scheme) to get hurt by the bad guys.

Like any type of securities fraud, social media stock scams can influence the decisions of investors to buy or sell.

But of greater concern is the increasing weight that social media traffic has on automated trading. Many private equity firms and hedge funds now incorporate data from social media streams because news often breaks there first.

"What we're starting to see now is people looking at Twitter to see key information," Charlie Irish, a technology consultant in London who advises financial clients on how to use new trading platforms, told the Huffington Post. "Quite often, you'll see data released on Twitter a few minutes before it hits the mainstream financial press."

Two Social Media Stock Scams Use Twitter
Two incidents that occurred at the end of January illustrate how vulnerable automated trading can be to a social media stock scam.

The victims were two small-cap companies (which are more susceptible to this sort of short-term manipulation) - audio chip maker Audience Inc. (Nasdaq: ADNC) and biopharmaceutical Sarepta Therapeutics (Nasdaq: SRPT).

The attack on Audience struck on Jan. 29. Someone created a fake Twitter account intended to fool people into thinking it belonged to Carson Block of Muddy Waters Research, a firm best known for following Chinese companies and exposing their accounting problems.

Human traders ignored the series of lunchtime tweets, which suggested Audience was under investigation by the Department of Justice for fraud.

But at 2:20 pm. ADNC shares suddenly plunged 25%, which suggested that automated trading systems programmed to scan social media for negative news reacted to the tweets. The stock recovered 16 minutes later, but it shows how easily a social media stock scam can be executed.

"It's trade and ask questions later," Jamie Lisette, president of The Hammerstone Group, told the Huffington Post. Lisette said "tons of bots" are always on the lookout for negative news in the social media sphere, and less-sophisticated ones can be fooled by stock scams most humans would recognize.

The day after the Audience incident, someone else created a fake Twitter account for Citron Research and sent out negative tweets about Sarepta Therapeutics, causing that stock to fall 9% in seconds.

These perpetrators can get creative too.

In an episode last month, one enterprising wrongdoer used a fake Twitter account to impersonate well-known investor David Einhorn of Greenlight Capital to try to create the impression that Einhorn was siding with fund manager Carl Icahn in his very public spat with fund manager Bill Ackman over Herbalife Ltd. (NYSE: HLF).

People can even get in trouble unintentionally. In December, Netflix, Inc. (Nasdaq: NFLX) CEO Reed Hastings tweeted that Netflix users had streamed 1 billion hours of video in June and was notified by the SEC that it could be a violation of fair-disclosure rules.

Dealing with Social Media Stock Scams
While the SEC and FBI have been aware of social media stock scams for at least a year, that hasn't made it any easier to stop them.

However, they plan to treat it the same as any other securities fraud, and those who are caught will be punished.

And there have been a few successes. In January 2012 the SEC charged a financial advisor with using LinkedIn Corp. (NYSE: LNKD) to sell fake stocks.

"As some violators have learned the hard way, using social media to defraud investors leaves an electronic trail of footprints for our investigators to follow," John Nester, a spokesman for the SEC, told Reuters.

But ultimately, the best defense against social media stock scams is constant vigilance, both by individual investors paying attention to where they're getting their stock news and companies reacting quickly to counteract bad information.

"Whether it's untrue or semi-true rumors, the days where corporate press offices could sit and think things over for 24 hours are over," Jonathan Armstrong, a partner at Duane Morris who specializes in Internet law, told FOX Business Network. "If companies aren't prepared, a lie will travel more than the truth can."

Source :http://moneymorning.com/2013/03/11/how-social-media-stock-scams-could-put-your-money-at-risk/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in