Pump and dump scams make a comeback

Pump and dump scams are back and they're even infiltrating some unlikely corners of the pop music landscape.

The Plain Dealer  reports that rap artist 50 Cent recently tweeted that there was an obscure company called H&H Imports, a distributor of headphones, poised to make big dough. His 3.8 million followers went crazy buying the stock and in just a few hours, 50 Cent had a $10 million profit on paper because he was a shareholder.

This is a classic pump and dump scam. With these kinds of things, blogs, e-mails, message boards and now social media are used to tout some lightly traded public companies that supposedly have promising new technology or are otherwise on track for a big break. The pitch is that you can get in on the ground floor of this hot opportunity, which is usually a penny stock (aka pink sheet offer).

The scamsters putting out this drivel enticing people to invest in unknown companies are usually primary shareholders in those companies. Some company owners and CEOs don't even know it's happening to their companies!

In this case, 50 Cent apparently truly believed in the company, unlike with most pump and dumps. He later had to put out tweets disclosing his interest in the company and advising people to talk with financial advisers about investing in H&H.

But the end result is the same: Unwitting average Joes get the "hot stock tips," buy the worthless stock (driving up its value) and then the criminal promoters sell their shares at huge illegal profits. The value collapses as soon as it becomes clear that the company isn't as hot as it seemed, and the promoters get away with potentially millions of dollars.

Don't ever believe a hot tip that somebody slips to you, thinking it will be your ticket to wealth. More likely than not, it's going to be your ticket to losing that dough.