Pump-and-Dump Schemes
In a pump-and-dump, fraudsters hype a thinly traded stock, then sell their shares to the buyers they attracted. Here is how the scheme works, why small stocks are targets and how modern versions use group chats.
How it works
| Stage | What happens |
|---|---|
| 1. Accumulate | Promoters quietly buy a cheap, thinly traded stock |
| 2. Pump | They spread hype: fake news, bold price targets, “once in a lifetime” claims |
| 3. Surge | New buyers push the price up on heavy volume |
| 4. Dump | Promoters sell into the buying |
| 5. Collapse | The price crashes, leaving late buyers with big losses |
The classic pattern.
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