NASD Warns Investors About China Stock 'Pump and Dump' Scheme

The NASD issued an investor alert Monday warning investors about e-mails, faxes and even cellphone text messages touting low-priced China stocks that, the messages say, promise tremendous returns. Many of these stocks, NASD said, are not even related to China.

One fax, for instance, was headlined “Grabbing massive profits in China has never been easier than right now!”

The senders’ goal is to drive up the price of the stock and sell out for a huge profit that ends up draining the value of the stocks held by the duped investors.

“The fact that a company has ‘China’ in its name can be misleading, especially since most of the companies being peddled are not even incorporated in China,” said NASD Chairman and CEO Mary L. Schapiro. “The best way to avoid being taken in by a scam is to ignore these unsolicited stock recommendations or at the very least investigate the company and its claims before investing.”