Picked this up from another board. Lesson for all of us.
an interesting article from stockhouse.com
A StockHouse Investor Protection Special Report: 9 Red Flags that Identify Online
Message Board Scammers
Miami, FL, May 4 /SHfn/ -- The continued explosive growth of online message boards
often victimize the novice investor. Notorious posters cloaked in the anonymity of a chat
forum can easily deceive many first-time visitors to message boards. The
StockHouse.com ® RapidResponse ™ team has identified 9 Red Flags that may help
prevent being misled.
Who is the name behind the message your are reading? In many cases, you will never
know. Dishonest posters can fool even the "respectable" message boards. One leading
message board claims their $50 registration fee eliminates such dirty tricks, but many
stock manipulators get around this by sending in $50 money orders, instead of
surrendering their credit card numbers.
The checklist below offers some of the ways you can spot manipulative posters. The list
is more of a rating system than absolute con-artist detection list. The greater the number
of violations by a poster, the more likely he or she is promoting the stock for some
ulterior motive. One or more violations do not necessarily mean the poster is a stock
promoter, but continued violations over many stocks may identify someone as such a
person.
StockHouse has introduced a "VOICE YOUR OPINION" module, found in the
username's profile. You can help the RapidResponse ™ team in separating the illicit
posters from the honest investor by commenting on such imposters. Just click on the
User Name. When the profile appears, click the "Voice Your Opinion" line and type in
your message.
By the way, not all fraudulent posters are bullish - some post to drive shares in the stock
lower either with a vendetta or to profit by shortselling.
THE RED FLAG CHECKLIST
1. Someone who hyper-posts on only one stock.
During the promotional run of that stock, he may be posting between 8 and 20
messages daily (sometimes more). He will promote for only so long until he has
exercised the stock options that he has been paid to promote the stock or until his cash
contract with the company expires.
2. Someone who uses multiple identities.
This is hard to detect. Generally, the poster will run with one identity until he has
become despised on the message boards. Then, he will register again with a new
identity. If one carefully studies such an individual, it will be found that he posts
repeatedly about the same set of stocks, or just one stock. He will post during the same
time each day or night. His messages will commonly be the same length. His writing style
will be similar and he will use the same phrases or key words in his messages. Often,
this is the hired promoter. He is paid to post on message boards throughout the Internet,
either in cash or stock options.
3. Someone who repeatedly attacks or belittles others on a stock's message boards.
This goes beyond the simple heated debate with one or two members who disagree
with him. If you carefully read his messages, this promoter will sound like he is fighting
for his life --with nearly everyone who challenges him. This might be the CEO or
investor relations employee for the company or it could also be a hired promoter.
4. Someone who emerges as the stock's moderator, or even the leader of the discussion
group or that stock.
This person is different from someone who has a genuine fundamental understanding of
the company and who is also helpful. A promoter/leader will diligently answer to
virtually every negative comment made on "his" message board. He will also cheerlead
every positive comment and constantly make an appearance on the message board to
"show" he is still the boss. Again, a paid promoter.
5. Look for the poster, with a short history in their member profile, who suddenly shows
up during a stock runup, and appears to know "all about" the company.
This person is different from the excited investor, who just bought shares in the company
and is enthusiastic about it. The impostering poster hints at "inside information" and
quickly name-drops some connection to a company insider or employee. While the
"excited" investor may rave about something an investor relations employee told him, the
imposter hints at important, but as of yet unannounced, development(s) that may impact
the stock price.
6. Someone who is nearly always the first to respond to company developments.
Occasionally, someone else will beat him to it. Otherwise, he's first or a close second
almost every time. Paid promoters are paid to be on their toes. Commonly, he will
positively spin the news, to soften the blow of less than good news or to make good
news appear better than it actually is.
7. Someone who continuously hints at upcoming company developments, unreleased
company news, unannounced contracts and forecasts discoveries in natural resource
exploration stocks.
Where did he get his information? Usually, he is the one who starts the rumor and might
often state that he heard it from someone else. Yes, he did - a company insider. This is
where the old cliché (Buy on the rumor; sell on the news) comes from: the company
insider who leaked the news. Paid promoter or company insider or long-term and
trusted follower, who is also a significant shareholder.
8. Someone who hypes the company during the runup and then "changes" his mind and
begins attacking the company, the company insiders and the project.
This individual is different from the enthused investor who realized he was just scammed.
That person is less controlled in his emotions, which is evident in what they write in their
postings. The hypester carefully controls his statements, both up the chart and back
down. On the way up, he may help the stock move higher by adding to the
cheerleading, so that he can build a substantial short position. Once he changes his mind,
it stays changed, though. The "excited" investor is confused and sounds it, when you
read his messages. The latter hasn't the slightest doubts about his position on the
company.
9. Someone who goes out of their way to find bad news about the company and makes
a "case" out of it.
These individuals might include ex-friends, ex-family (divorced) and ex-employees,
including ex-promoters. Such people don't just post a single negative item. They either
take one negative and make it look like "the sky is falling" or they continuously bring it
up. That an individual makes frequent appearances to vent their spleen is the clue, which
gives them away. Disgruntled investors usually move on and don't want to be reminded
of their bad investment.
One way to cross-check the message board postings to determine if there is an escaped
fraudulent manipulator at large is to compare his posts against the company news
releases. The fraudulent companies generally amplify their slightest achievements and
play down their failures. Companies with a history of failures - running a company into
the ground, never achieving anything of merit and diluting their market value through the
repeated issuance of new shares via private placements or secondary offerings - tend to
hire the most egregious and unscrupulous promoters.
The above 9 Red Flags are by no means a complete list of warnings signs and should
only be used as guidelines to protect yourself from fraudulent messages and posters.
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