Series 63: 5.7.6.3. Common Types Of Social Media Fraud

5.7.6.3. Common Types of Social Media Fraud

As the popularity of social media increases, so do the fraudulent investment schemes that rely on social media. Social media presents an environment where information is easily made available to many users. Users recommend products that they like to others, creating an environment where many are exposed to misleading and false information. In addition, people commonly reveal intimate details of their lives, presenting a situation ripe for fraud. Common forms of social media fraud include:

• “Pump and dumps.” These schemes typically involve “pumping” up the price of a security through false or misleading information across an array of social media sites. Posts on these sites will often claim to have inside information and urge investors to purchase a stock quickly to get in early on t