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E-Articles - Fraud-Pump And Dump Schemes Are Still Around
Pump and dump schemes have cost investors hundreds of millions of dollars in the past few years. The World English Dictionary defines them as, “involving unscrupulous stock market manipulation: describes a fraudule
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
nt scheme in which unscrupulous stockbrokers, analysts, or stockholders highly recommend their own stocks in order to drive up the price before selling for a quick profit (slang).” Although the definition describes
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
a textbook scheme, it does not describe how this fraud is operating in the investment market today.
An advanced communication system has made these schemes much easier to perpetrate. A fraudster can take a positio
An advanced communication system has made these schemes much easier to perpetrate. A fraudster can take a positio
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
in a stock, promote (hype) the stock and sell after the price has increased; then sell the stock short on the way down. Since he must know how the price of the stock will operate to be effective, he has to control
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
the reasons investors will buy and sell the stock.
The fraudster will use a microcap stock. Most of these stocks trade on the Over The Counter-Bulletin Board market (OTC-BB). These thinly traded stocks help in t
The fraudster will use a microcap stock. Most of these stocks trade on the Over The Counter-Bulletin Board market (OTC-BB). These thinly traded stocks help in t
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
king an initial position at a low price, controlling the information about the stock, and attaining large increases in the stock’s price on small demand. The textbook approach was for the fraudster, often the broke
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
, to tell other investors about the stock to create demand and increase the price. The fraudster will then sell (dump) his stock at a profit.
This scheme evolved by using boiler-room marketers, when the technology
This scheme evolved by using boiler-room marketers, when the technology
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
of telephone systems began to have automated dialing systems and inexpensive calling costs. This further evolved to the fax machine, which became popular and less expensive than the labor-intensive boiler-rooms.
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
nce the internet became popular, it became the tool of choice for the fraudster. It is the most effective way to get information out to investors and often not disclose the fraudster’s true identity.
One actual ca
One actual ca
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
e went as follows. Fraudster one identified a small high-tech company, which needed capital to get its products to market. He had fraudster two, an investment banker he knew, approach the owner of the company abou
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
raising capital. The owner agreed and the investment banker suggested taking the company public by merging the company into a clean publicly-owned shell company, which was trading on the OTC-BB. Fraudster two arr
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
anged a $10 million investment from a third party into the now public company. An initial deposit of $800,000 was made into the company with the balance due upon closing. Fraudster one, two and several others, who
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
knew about the fraud, took positions in the company’s stock at very low prices.
Then the hype or pump started in earnest. The owner began reporting news of the new investment on the company’s web site. The group
Then the hype or pump started in earnest. The owner began reporting news of the new investment on the company’s web site. The group
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
f fraudsters, who had done this many times before, began posting information about the company in chat rooms and on web sites. They also purchased stock at increasing prices to encourage the run-up in price. The s
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
tock started at $ .10, but increased to over $10 within a few weeks.
It was now time for the dump or sale of the stock by the fraudsters. They not only began selling off their positions, but also sold the stock sh
It was now time for the dump or sale of the stock by the fraudsters. They not only began selling off their positions, but also sold the stock sh
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
rt, knowing it would continue to decline. After they sold their positions at a nice profit, fraudster two told the owner that the new investment had fallen through and this news hit the company’s web site and chat
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ooms. The stock went into a free fall and bottomed below its original $ .10. Of course the fraudsters covered their short positions, making another tidy profit.
Did the owner know about the fraud? No, but he was
Did the owner know about the fraud? No, but he was
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
encouraged to take part in the hype. He lost his investment and the company was bankrupt, having counted on the new investment. Of course the $10 million new investment was part of the fraud. How much did the g
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
oup of fraudsters make on this fraud? No one knows for sure, but based on the volume and the price fluctuation, their profit is estimated in the millions.
The Securities and Exchange Commission has released these
The Securities and Exchange Commission has released these
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ips for avoiding stock scams on the internet: consider the source, find out where the stock trades, independently verify claims, research the opportunity, watch out for high-pressure pitches, and always be skeptical
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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