How To Avoid Stock Scams

Wednesday, February 11th 2009, 9:54 pm
By: News On 6

By Ashli Sims, The News On 6

TULSA, OK -- Two Tulsa men charged in a $41 million stock scheme are out on bond.  Both bonds were set at a million dollars.  Federal prosecutors say they scammed investors across the country out of millions by artificially pumping up stock and then dumping it.  One financial advisor reminds investors there are ways to protect your investments.

Invest pennies and walk away with thousands, maybe millions.  That's the lure of penny stocks.

"Put $10,000 into a stock that's traded for a penny and you could either go to zero or you could go to two cents and you double your money," said Jake Dollarhide with Longbow Asset Management.

But, it's a high risk game that can be prime for scammers.  And, federal prosecutors say two local men were playing the penny stocks and running a $41 million scheme in Tulsa.

Attorney, G. David Gordon, and businessman, Rick Clark, are accused of buying up shares in businesses like Deep Rock Oil and Gas for seven or eight cents apiece.  Then, investigators say Clark, Gordon, and three other men would send out blast emails and faxes, touting the company.   

A federal indictment says Deep Rock shares skyrocketed worth five times as much as before.  Federal prosecutors say that's when Gordon, Clark and the other defendants coordinated sales, walking away with thousands in profit.

But, while Gordon lived in the lap of luxury, prosecutors say other investors were left with a pile of worthless stock.  Some websites now mark Deep Rock Oil and Gas shares with a skull and cross bones.    

But, financial experts say there's a way to protect yourself, before you get caught up in a scam.

"First of all, I think you always have to do your research," said Jake Dollarhide with Longbow Asset Management.

And, watch out for emails or faxes promising quick cash.

"Why are they emailing you? And, if they have this hot stock tip why are they sharing it with you out of the blue? That I think is the biggest red flag," said Jake Dollarhide with Longbow Asset Management.

You should also check out the company and look over its balance sheet.  There is a website that lets you check your broker's background.