Pump and Dump is an investment scheme where fraudsters heavily promote or “pump” the purchase of specific company stock, which creates high demand and drives up the prices of the stock. The individuals behind the promotion then sell or “dump” their shares at the increased price and stop promoting the stock, which leaves other investors with stock that is worth far less than what they initially paid for the stock.
Unscrupulous promoters or brokers will often hype a stock through use of company websites, online bulletin boards, chat rooms and online investment newsletters. They may even go so far as to create false press releases or mislead investors with claims of a revolutionary product approved by a federal government agency. After the price skyrockets, the promoter or broker sells the stock to an unsuspecting investor and pockets the large profit.
Don’t be caught in a scam. Learn how to check out any potential investment opportunity and read a brochure on Investment Fraud on the Internet.