Dump and dilute schemes, where companies repeatedly issue shares for no reason other than taking investors’ money away. Companies using this kind of scheme tend to periodically reverse-split the stock.
Microcap fraud has been a major source of income for organized crime. Mob figures from each of the Five Families of the New York mafia, as well as the New Jersey mob, have become involved in stock scams. The Russian Mafia is also involved with this type of microcap stock fraud.
Mafia involvement in 1990s stock swindles was first explored by investigative reporter Gary Weiss in a December 1996 Business Week article. Weiss later explored the Mafia’s Wall Street scams in a book.
Organized crime elements were believed to have been short-selling chop stocks in the late 1990s.