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Penny stocks can be riskier than any other stock. Here's why they're so dangerous.

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Penny stocks inspired a new breed of investors, high-stakes gamblers, risk-taking fraudsters and enforcement action.

"It all kind of comes together as the perfect storm of opportunity for criminal enterprises," Greg Ruppert, head of FINRA's member supervision organization, told CNBC."Certain statements or claims could be made that are not readily verifiable or easily investigated or tracked.

Before Zamansky started representing investors who were abused by Wall Street firms, he was an attorney for Stratton Oakmont. That's where he learned about the business of penny stocks. Innocent investors bought into Belfort's sales pitch, which artificially pumped up stock valuations. Then, the firm would sell its shares. That's known as a"pump and dump" scheme.

 

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