Pump-and-Dump Scheme

A securities fraud scheme in which a person or group artificially inflates, or pumps, the price of a stock, typically a low-priced and thinly traded security, through false, misleading or exaggerated public statements about the company, often distributed through unsolicited email, social media or online forums, and then sells, or dumps, their own previously accumulated shares at the inflated price before it collapses, leaving later investors who bought in on the false hype holding a devalued stock. The United States Securities and Exchange Commission has documented pump-and-dump schemes as a recurring form of securities fraud predating the internet, but has noted a substantial expansion in scale and reach as social media and low-cost online trading platforms made it possible to reach a large number of potential investors quickly and cheaply; the scheme is generally prosecuted as securities fraud and market manipulation, distinct from the related but separate offense of insider trading, which concerns trading on material nonpublic information rather than spreading false public information.