Pump and Dump

pump and dump

Market manipulation in which a thinly traded stock is accumulated, promoted, and subsequently sold at an artificially high price to unsuspecting investors. Internet chat rooms where investors gather investment information from unknown parties facilitate this illegal practice. Compare poop and scoop.

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Pump and Dump

An illegal practice in which investors attempt to artificially inflate the price of a stock by disseminating inaccurate or misleading information. These investors have a long position on the stock in question and seek to inflate the price in order to sell their shares for a higher profit. Pumping and dumping violates securities laws and can lead to hefty fines. Victims often stand to lose a good deal on pumping and dumping as the price of the stock usually falls to its previous level in a relatively short period of time.

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Pump and dump. In a pump and dump scheme, a scam artist manipulates the stock market by buying shares of a low-cost stock and then artificially inflating the price by spreading rumors, typically using the Internet and phone, that the stock is about to hit new highs.

Investors who fall victim to the get-rich-quick scheme begin buying up shares, and the increased demand drives up the price. At the peak of the market, the scammer sells out at a profit, shuts down the rumor mill, and disappears. The price of the stock invariably drops dramatically and the investors who got caught in the scam lose their money.