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Pump and Dump Schemes

"Pump and dump" schemes have two parts. In the first, promoters try to boost the price of a stock with false or misleading statements about the company. Once the stock price has been pumped up, fraudsters move on to the second part, where they seek to profit by selling their own holdings of the stock, dumping shares into the market.

These schemes often occur on the Internet where it is common to see messages urging readers to buy a stock quickly. Often, the promoters will claim to have "inside" information about a development that will be positive for the stock. After these fraudsters dump their shares and stop hyping the stock, the price typically falls, and investors lose their money.

Additional Information

Investor Alert: Investment Newsletters Used as Tools for Fraud
Investor Alert: Don’t Trade on Pump-And-Dump Stock Emails
Investor Alert: Social Media and Investing – Avoiding Fraud
Microcap Stock: A Guide for Investors
Microcap Fraud spotlight
Internet Fraud