Traditionally, “pump and dump” schemes involve the promotion of company shares through false and misleading statements to the marketplace. After pumping the shares, fraudsters make huge profits by selling their cheap shares into the market.
Often these fraudsters will claim to have “secret” or “insider” information about an impending development or to use an “infallible” combination of economic and stock market data to pick shares.
In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is “pumped” up by the buying frenzy they create.
A pump-and-dump scheme can be summarised as buy, lie and sell high.
How does a Pump and Dump scheme work for property?
It’s simple; here are some examples:
Overseas property marketing companies have bought complete developments off-plan. They are offering them for sale to their clients telling them they are ‘fantastic‘ ‘once in a lifetime investment opportunities‘ being offered at a ‘substantial discounts‘.
Clients have bought multiple properties in the development and now, five years later, they find they cannot sell them – even at the price they bought them. Did the property marketing company pump and dump them?
A Registered Real Estate agent in Cyprus, acting on behalf of a property developer, guaranteed that investors:
“only have to invest 30% of the selling price, then the property is put back on the market before the next 60% is due and the property is sold at retail price.”
Unfortunately, investors found that the properties they’d could not be sold at retail price as guaranteed by the estate agent and had to either borrow money to meet their contractual obligations or risk being taken to Court.
In this case the Registered Estate Agent appears to have acted as a paid promoter who stood to gain by selling properties on behalf of the developer. They “pumped” up clients into a buying frenzy by making unrealistic ‘promises’ about the performance of their property investments.
So do take care if you’re planning to invest in the Cyprus property market. Do not believe the marketing hype, do your own independent research and visit the island to see what’s available and what you can get for your money. For obvious reasons, don’t fly over on a ‘free’ inspection visit, travel independently.
Finally, don’t forget that if a deal sounds too good to be true, it probably is!
