What is an internet “pump and dump” securities fraud scheme?

Question: What is an internet “pump and dump” securities fraud scheme?

Response:  The Securities and Exchange Commission (SEC) has increased its efforts to protect investors from the rapidly growing “pump-and-dump” e-mail and web schemes that are infecting the internet.  “Pump-and-dump” refers to fraudulent e-mail spam, web advertisements, message board posts and telemarketing phone calls that hype small, unknown company stocks – using  phrases like "ready to explode," "ride the bull," and "fast money."   The “pumpers” invest in these generally low-cost stocks before the spam and advertising campaign begins.  After the mass marketing campaign induces investors into buying the worthless stocks, the share prices go up and the pumpers “dump” the stocks on other unwary investors, cash out and disappear.   The sell-offs usually drive the stock prices down, and the other investors generally use everything.  Put simply, if an unsolicited investment opportunity seems too good to be trusted, it most likely is.

If you believe you have been the victim of a pump and dump securities fraud scheme, you should immediately consult an experienced securities attorney.  The pump-and-dump scheme is criminal securities fraud and should be immediately reported to the SEC.  Depending on the amount of money you invested, your attorney can also pursue civil fraud actions in state or federal court.

Answered by Jamilla Moore

Additional Resources: SEC on Internet Pump and Dump Schemes

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