What is a Daisy Chain?
In finance, a daisy chain is anscam whereby a group of fraudulent investors inflate the price of a security and then sell it at a .
How Does a Daisy Chain Work?
In a daisy chain scenario, an investor or group of investors holding a long position in a low-price, small-cap stock unfoundedly publicize the as a promising opportunity. Susceptible, credulous investors subsequently purchase , which, collectively, leads to a rise in the 's price because of heightened demand.
Once the original perpetrators have decided that the price of thehas peaked, they sell off the entirety of their positions for a . Subsequently, the false advertising campaign ends and the price returns to its original level.
Why Does a Daisy Chain Matter?
Daisy chain scams are an illegal practice punishable by heavy fines by the Securities and Exchange Commission (SEC). With the advent of easily accessible and effective advertising via the Internet, the scams have become more common in recent years. Though advice such as tips can be convenient, investors are strongly advised to perform their own research on recommended in order to avoid get-rich-quick scams.
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