Just 15 or 20 years ago, fleecing elderly people in the penny stock market was the domain of the pros. Convictions and jail time for swindlers like Jordan Belfort appear to have increased awareness around questionable activity, to a certain extent. As was suggested by Adrien du Plessis in the 1990s, operators can and will reshape activities to elude what authorities and journalists are focusing on at the current time.
The basic model behind all stock scams is for an operator to obtain a quantity of thin stock, hopefully cheaply, to then push on anyone who will listen. Sometimes, they may actively manipulate stock prices by buying, advertising positions, and encouraging others to buy before dumping their shares all at once.
Years ago, getting a deal on a big block of stock directly from a company, was the type of thing only afforded institutional investors. Today, via platforms like StockHouse.com, investors appear to have access to a range of private placements, facilitated with an economy of scale that allows smaller investors to participate, than ever before. Many of the shares involved in these private placements are traded on the TSX Venture Exchange and the Toronto Stock Exchange. Several of these companies operate near Kirkland Lake, Ontario.
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For those who might seek a method by which to part an elderly person with their life savings, the private placement would seem like the perfect way to do it. The most diabolical thing about it is that it would seem that many elderly people could be convinced that the stock merely fell in value, and that they had been a victim of mere bad luck, rather than fraud. This is actually the meaning behind the title of the 1973 film, "The Sting."
Admittedly, this is still no small-time scam, but based on analysis of recent private placements reported by TSX Venture Exchange-listed companies, it would appear to be in reach of mom-and-pop sized operators. It would seem that a few hundred thousand dollars might get one in the game to take an elderly person for a similar amount.
Diabolical, are all the different methods an operator can use to distribute a block of questionable stock, i.e. attract people to the TSX Venture Exchange to place orders to buy it: email lists, telephone cold calling, cold calling door to door, hyped-up newsletters, banner ads, or even, conceivably, convincing their own mother or father to buy it.
Kirkland Lake, Ontario: penny stock hotbed
It would seem that anyone in Canada today with a few hundred-thousand dollars, as evidenced by an October deal reported by Kirkland Lake's Orefinders Resources (TSXV: ORX) valued at $217,850, and reported, by none other than, StockHouse.com, could buy some stock in a similar company and take someone of their life savings using it. What StockHouse.com offers would seem comparable to some sort of turnkey-boiler-room-in-a-box, available to the medium-sized con artist, for the first time.
Buy a block of stock, manipulate the price up, print some fake news reports and analysis, and then show your dad, granddad, heck, even the neighbor, the reports and price action. You can sell them your shares in the open market and they will never know the difference. You'd have to be a scum-bag. However, it would seem that we have reached that apex of civilization where technology has allowed everyone to fleece everyone, just like the one percent.
Orefinders stock is down 93 percent since 2013, Yahoo Finance reports zero sales and EPS of -$0.01. The firm appears to have no analyst coverage. There is a seemingly vast number of similar penny stocks on the TSXV that trade in a way that appears comparable with out-of-the-money call options: most importantly in the way they seem to lose most of their value, most of the time. Sort of perpetual call options. Many operate near Kirkland Lake. But we're getting ahead of ourselves. Watch for part two in the series, "How renaming the securities traded on the TSXV to options could save lives." #Business