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Texas Crook Sought In Penny Stock Scam

I guess being a crook is just in some people’s blood or something. That appears to be the case for a Houston criminal by the name of Harris Dempsey ”Butch” Ballow.

Out on bail and already in trouble for allegedly being involved in a stock market scam, Ballow is now accused of cooking up another one.

This is the typical penny stock pump-and-dump scam that I have talked about here before, and is exactly the reason why investors should steer clear of penny stocks.

As tempting is it may sound to make a grand fortune trading penny stocks, the vast majority of investors lose money and in the worst cases, like with these penny stock scams, they lose money because some lowlife manages to pull of a scam like the one Harris Dempsey ”Butch” Ballow is accused of.

In this case, penny stock investors — no doubt with dreams of big profits dancing in their heads — were scammed out of a total of $3 Million.

In these types of scams, the scam artists manipulate the price of a stock by making up phony news and information about the company and sending it out via fax, news releases and e-mail. Maybe you’ve received some of these “stock alert” e-mail messages yourself. I used to get a lot of them, but these days I am not receiving any at all.

Investors who hear all this bogus information about how wonderfully the company is doing and how their share price is expected to skyrocket, buy up the stock and wait for their profits to come pouring in.

The smart ones who may be lucky enough to get in before the price spikes, sell out when they have a profit, but most investors are either too late getting in, too greedy to sell for a modest profit or hold the stock too long with the hopes that the price will recover after the big drop that occurs when the scam artist dumps all of his shares and makes a nice profit.

Since the scam artist owns a huge number of shares that were purchased very cheaply before the pump-and-dump was started, he makes a huge profit off of the investors that bought in as the stock price was rising.

I did my share of penny stock trading a few years ago and although I was never the victim of a scam that I am aware of, I lost a lot more money than I ever made trading penny stocks.

As I heard many times during my penny stock trading days, but refused to believe at the time: They are called “penny stocks” for a reason and they are so cheap because that is what they are worth.

At the risk of sounding like a broken record, my advice is to stay far away from penny stocks. There may be some seasoned investors that know how to successfully trade penny stocks, but unless you are one of them, trading penny stocks is much more likely to lose you money than to make it.

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