Pump and dump

For other uses, see Pump and dump (disambiguation).

"Night wind hawkers" sold stock on the streets during the South Sea Bubble. (The Great Picture of Folly, 1720)

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 (pump), in order to sell the cheaply purchased stock at a higher price (dump). 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[1] and very small corporations/companies, i.e. "microcaps".[2]

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, investment research websites, social media, and misinformation.[2][3]

  1. ^ Xu, Jiahua; Livshits, Benjamin (2019). "The Anatomy of a Cryptocurrency Pump-and-Dump Scheme". 28th USENIX Security Symposium (USENIX Security 19): 1609–1625. arXiv:1811.10109. ISBN 978-1-939133-06-9.
  2. ^ a b "Pump and Dump Schemes". U.S. Securities and Exchange Commission.
  3. ^ "Wake Up and Smell the Pump-and-Dump". Finra.org. Financial Industry Regulatory Authority.