Advisory: OTC stocks & cannabis

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This information is brought to you as a public service by HempToday

U.S. prosecutors and the Federal Bureau of Investigation say that fraud is widespread in the penny stock markets, which host a growing number of cannabis and hemp companies. Several of these firms have faced fraud and other charges by the United States Securities & Exchange Commission (SEC).

Penny stocks are also known as “OTC” stocks, “pink” stocks, “cent” stocks or the more palatable “small caps”

Penny stocks are common shares of small public companies that trade at low share prices, often resulting in low market capitalization. They can be highly volatile, and are subject to manipulation by stock promoters in which investors suffer from “pump and dump schemes” characterized by aggressive public relations and sales of a “get rich quick” nature.

The penny stock market has little liquidity, so shares in penny stock companies are often difficult to cash in.

Relevant links:

SEC Advisory: “Pump & Dump” stocks
Backgrounder: Forbes – “First pot stock billionaire”
Fraud case has hemp in the news, unfortunately
U.S. CBD firm facing fraud charges*

*Case outcome: Final judgment as to Defendant Michael J. Mona, Jr.