Story of Stock market Newsletter Scam

Gyan on Treadmill dated 25-Mar-2018

In his Google talk on Prejudices of Mr.Market, Prof.Sanjay Bakshi talks about a stock market scam. Let us drill it down.

A scammer started off with a list of 364500 email addresses. He divided them into three groups, A, B and C. He identified a volatile small cap stock.

To group A, he send an email stating that the stock price would go up in the coming week

To group B, he send an email stating that the stock price would remain the same in the coming week

To group C, he send an email stating that the stock price would fall in the coming week.

At the end of the week 1, depending on the movement of the stock, one of the group (121500) people got the email with the correct prediction. Let us say it was group A.

A member of group A received this email saw the prediction and checked with the outcome and ignored it as a fluke.

In the next week, he focused on the group A. Again he divided the population of 121500 into three groups, let us call them group D, E and F. He did the same thing as he did initially. That is:

To group D, he send an email stating that the stock price would go up in the coming week

To group E, he send an email stating that the stock price would remain the same in the coming week

To group F, he send an email stating that the stock price would fall in the coming week.

At the end of week two, one of the groups would have got the correct prediction, Let us say it was group E.

A member of group E would have now received predictions of two weeks that turned out to be correct. His curiosity is piqued. 

Now he ignored groups D and F and focused on group E. He again did the same thing. Divided them into three groups and followed the same process for this new group with a population of 40500

Like this he continues for 6 weeks. At the end of the sixth week, there is a population of 500 people who have got correct predictions on all the 6 weeks...

On the seventh week, he sends these 500 people a mail stating that if they wanted to continue with his services, they can subscribe to his newsletter by paying a subscription fee of Rs.100000 per year.

How many of those will fall for this? Even if one third falls for it, he would have earned Rs.17000000, (17 Million), for an overall effort of sending six emails....

Moral of the story: Do not fall for Stock Market Newsletter Scams