"Pump and dump" (PND) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. "microcaps".
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“They were the victims of a classic pump-and-dump scheme.”
“The shitcoin promoters were running another pump-and-dump.”
“A pump-and-dump is a form of securities fraud.”
Definition(s) from the Web
Pump and Dump (P&D) is a common scheme used in cryptocurrency trading that involves inflating the price of an owned cryptocurrency through misleading statements, in order to sell the cheaply purchased cryptocurrency at a higher price. Source
“Pump and dump” (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. “microcaps”.
While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors through spam email, bad data, social media, and misinformation. Pump and dump schemes may take place on the Internet using an email spam campaign, through media channels via a fake press release, or through telemarketing from “boiler room” brokerage houses (such as that dramatized in the 2000 film Boiler Room). Often the stock promoter will claim to have “inside” information about impending news. Newsletters may purport to offer unbiased recommendations, then tout a company as a “hot” stock, for their own benefit. Promoters may also post messages in online chat groups or internet forums, urging readers to buy the stock quickly.
If a promoter’s campaign to “pump” a stock is successful, it will entice unwitting investors to purchase shares of the target company. The increased demand, price, and trading volume of the stock may convince more people to believe the hype, and to buy shares as well. When the promoters behind the scheme sell (dump) their shares and stop promoting the stock, the price plummets, and other investors are left holding a stock that is worth significantly less than they paid for it.
Fraudsters frequently use this ploy with small, thinly traded companies—known as “penny stocks,” generally traded over-the-counter (in the United States, this would mean markets such as the OTC Bulletin Board or the Pink Sheets), rather than markets such as the New York Stock Exchange (NYSE) or NASDAQ—because it is easier to manipulate a stock when there is little or no independent information available about the company. The same principle applies in the United Kingdom, where target companies are typically small companies on the AIM or OFEX.
A more modern spin on this attack is known as hack, pump and dump. In this form, a person purchases penny stocks and then uses compromised brokerage accounts to purchase large quantities of that stock. The net result is a price increase, which is often pushed further by day traders seeing a quick advance in a stock. The original stockholder then cashes out at a premium.
Pump and dump schemes also permeate the crypto-market, targeting especially low market-cap, illiquid coins on cryptocurrency exchanges. Source