Penny stocks are the stocks traded on the OTC BB or Pink Sheets exchange. There are also some other people who regards this scheme as a common stock that trades for less than $5 a share and is traded over the counter (OTC) through quotation services such as the OTC Bulletin Board or the Pink Sheets.

What is a Penny stocks?

Penny stock scam

Many companies employ various ways to promote fake penny stocks. The usual penny stock scam are postings about a stock from unknown, fake or misleading press releases issued by the company, spam e-mails and junk faxes that advertise absurd and fake claims, dishonest newsletter writers who support a stock for a fee, paid posters, or foreign buyers all in attempt to drive up the share price while the insiders sell.

The payment of brokers usually is made "under the table" secret payoffs to put up for sale such stocks. The subject stocks generally have small or no liquidity earlier to the block purchase. After the block is purchased, the firm's partaking brokers will trade the stock to their brokerage customers at the then-current quoted ask price, to the often persecuted investors who are generally unaware of this practice.