Chop stock
From Wikipedia, the free encyclopedia
A chop stock is an equity, usually trading trading on the OTCBB or Pink Sheets listing services, that is sold by unscrupulous stock brokers to unsuspecting retail customers at a considerable commission, often as high as 50%. The penny stock being promoted typically has few financial prospects and a large share float. Normally the share price will collapse when the promotion ends, leaving investors penniless.
This scam differs from a pump and dump in that the brokerages make money not by unloading their own shares at overvalued prices, but by marking up the stock's price before they sell it to the victimized investors. These shares are often acquired at a discount to the fair value, through Regulation S or Rule 144, and sold illegally in violation of the equity's lock-in period.
