VIP Fraud Detection Services

Pump and Dump Scams Overview

With the increasing global use of online trading by consumers, online brokerages have a pressing need to protect themselves from online fraud such as “Pump and Dump” scams. Pump and Dump scams are typically caused by fraudsters buying large quantities of penny stocks or thinly-traded stocks first from their own account and then from compromised or hijacked accounts.

Typical stocks involved in such scams are low price, high price volatility, low trade volume, low market cap stocks, etc. The sudden increase in the stock volume causes an artificial increase in the stock price. The fraudsters then sell their own shares of the stock to make a sizable gain. Pump and Dump scams typically take only a short time to execute. Once executed, the losses range from a few hundreds of thousands to millions of dollars. In addition, when the losses become public, this may damage the reputation of the brokerages involved.

VIP Fraud Detection Service Stock Trading Module

Fraud detection can be more difficult to prevent for online brokerages and trading firms than it is for other businesses because of the real-time nature of stock transactions. The VIP Fraud Detection Service Stock Trading Module for Pump and Dump scams can analyse stock trades in real-time after the trade is placed but before it is executed. The unique behavioural engine is ideally suited to monitor stock transactions and its associated fraud. The module uses unique models to determine the risk of each trade. In the event of any anomaly or high risk transaction, the service will flag potentially fraudulent activities and can optionally intervene to validate the transaction using the standard methods such as phone, one-time password (OTP), SMS, Email, etc. The VeriSign Identity Protection Fraud Detection Service enables online brokerages to analyse stock trades in real-time and helps prevent Pump and Dump scams without adversely affecting the user experience.