Alerts

Pump & Dump is simple to explain - and almost as simple to do.

A person buys shares in a company (or options in the company's shares) and then releases information ("pumps") intended to ensure that there is unusual market activity in the shares of that company. Once the price rises due to that demand, the person sells (or "dumps") his shareholding at the higher price.

The manipulation of the market in this way is not always due to the release of fraudulent information: it may be that a little known company has issued information which the person thinks, if brought to a wider audience, will increase its share price. In this case, he buys the shares, republishes the information to the widest number of people possible (often by spam e-mail or website / bulletin board postings) and sells out as people buy in.

Because market rules generally require anyone promoting a company to declare any interest they may hold in the company, some spammers seek to avoid liability by declaring their shareholding in a footnote, usually surrounded by disclaimers and a supposed publishing or analytical firm.

This is, generally, not sufficient to avoid a successful prosecution.

CAVEAT: inclusion in this section DOES NOT make any representation or implication that the target company or any of its officers are in any way complicit or instrumental in the pump and dump fraud.