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Pump & Dump Stock Scam - What Are They?

A pump-and-dump scam is the illicit act of a capitalist or cluster of investors promoting a stock they hold and merchandising once the stock value has risen following the surge in interest as a result of their endorsement.

Pump and Dump

Pump-associated dumps (P&D) may be a type of securities fraud involving unnaturally inflating the value of an in-hand stock through false and deceptive positive statements to sell the cheaply purchased stock at a better worth. Once the operators of the theme “dump” (sell) their overvalued shares, the value falls, and investors lose their cash. This can be commonest with small-capitalization cryptocurrencies and really tiny corporations/companies, i.e., “microcaps.”

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Table of Contents

How Does the Pump and Dump Scheme Work?

A pump-and-dump strategy uses recommendations based on false, deceptive, or excessively exaggerated assertions to increase a stock’s price. Social media platforms and anonymous group chats like Telegram and Discord are the preferred communication channels for traders who engage in pump-and-dump trading.

The scheme’s promoters will then coordinate the spread of rumors, false information, or hype in an effort to artificially boost interest in the asset and raise its price. The promoters then sell the stock at a premium once an unwary buyer has sufficiently raised the stock prices.

Cold calling was commonly used in pump-and-dump scams. But as the internet has grown in popularity, this illegal behavior has multiplied. Online scammers post comments persuading investors to purchase stock right away by claiming to have inside knowledge that a certain development will increase the share’s price. Once buyers enter the market, the perpetrators sell their shares, which causes the price to fall sharply. Then, new investors lose money.

The easiest equities to manipulate in these strategies are micro- and small-cap stocks. These businesses are frequently quite illiquid, and their prices fluctuate. The group responsible for the scam raises interest in and trading activity in the stock, and the sudden rush of buyers causes a rapid increase in the stock price. The group will sell its position to make a big short-term profit.

How Can You Avoid Becoming the Victim of a Pump and Dump Scheme?

To help people avoid falling prey to a pump-and-dump operation, the Securities and Exchange Commission (SEC) has provided some advice. Here are some things to remember:

Pump and Dump

1. Take Unsolicited Investment Offers Very Seriously

If you get unsolicited communication about an “investment opportunity,” proceed with extreme caution. Such questionable investment pitches may contact you by email, a comment or post on your social media page, a direct message, a call, or a voicemail on your cell phone, thanks to the abundance of virtual communication channels. Avoid responding to such letters because doing so could lead to huge losses rather than the rewards that the con artists promised.

Scammers see opportunities specially in Social Media. We can guide and support you, contact us now!

2. Beware of Affinity Fraud

Investment swindles that target members of specific groups, such as religious or ethnic communities, senior citizens, or professional associations, are referred to as affinity fraud. You might be convinced of the trustworthiness of an investment pitch by a member of a group you are a part of. Still, the person might have unknowingly duped into thinking the investment is legitimate (when it is just a scam).

3. Do Your own Research & Exercise Caution

Perform your own study and due diligence before investing your hard-earned money. Online, you can easily find a variety of information about reputable businesses, including their financial records, management team, and commercial prospects.


If you have suspicions of a scam or phishing attack, you can rely on experts to help you with protection, mitigation, and fund recovery. You will feel safe knowing that experts with years of experience will be guiding you!


Types of Pump & Dump Schemes

There are numerous types of Pump & Dump schemes, they vary in terms of nature, the strategy involved as well as the target niche the scammer is after. Outlined below are two of the most common pump and dump scam methods.

  • The first type of such a pump and dump strategy involves disseminating inaccurate information about the company, which will increase share prices. This scheme contains any kind of manipulation of records concerning a corporation and its stock. It might also consist of inventory pitches by means of telephone, fake information releases, and distribution of some type of “inside” facts that can raise the inventory price.
  • The next method is producing fictitious demand for the company’s shares, which means a broking firm will be hired. It will create fictitious demand for the shares while omitting the offer of any company shares for sale, affecting the share price.

Example of A Pump & Dump Stock Scam

Penny stocks, sometimes known as “micro-cap” or “nano-cap” equities, are inexpensive stocks that represent minor businesses. As the name implies, these stocks frequently trade for less than $2 per share, making them significantly more accessible to novice investors or those with limited resources.

A fantastic way to invest in a fresh, exciting company early is through penny stocks. Shares can be purchased for as low as $0.0001; if you’re fortunate, your investment may be valued up to a million dollars. The catch is that they are risky investments. If you need to know what you’re doing, losing all your money is simple.

Many con artists convince victims that they can make quick money by telling them that their stock will increase overnight. It’s known as “pump-and-dump” when something worthless suddenly becomes extremely valuable. When that happens, the con artists will sell their shares and profit, leaving you with nothing but regret.

Key Takeaways!

When it comes to making financial decisions, you should always keep the following in mind: “If something looks too good to be true, it usually is.”

If someone you don’t know gives you a stock tip, take a moment to think about why they would be willing to share information of this kind with you. It is quite unlikely that you will see a significant return on your investment in a short period of time. In addition to this, it is essential that you do your own research before making any investment.

You should find that this makes it easier to avoid becoming a victim of fraudulent pump-and-dump schemes. In case you have become a victim of a pump and dump scam, be sure to reach out to the Claimers, we will help you get your money back by recommending the best asset recovery specialists in town.

The Claimers provide information about different kinds of scams and how to avoid it.

do you need help?

A lot of those who contact us have questions and concerns about their personal and business data being compromised. We aim to arm you with the legal and technical know-how in the fight against scams. Also, we will be able to refer you to top scam recovery agencies.

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