Pump and dump

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A stocks night singer sells stocks on the street during the South Seas Bubble in Amsterdam in 1720

The term Pump and Dump ( P&D ) describes a form of stock fraud with low capitalized stocks ( penny stocks ), in which the price of a stock is artificially increased ("pumped up"; English pump ) by the before by false and misleading positive statements Selling cheaply bought stock at a higher price to bona fide investors. As soon as the operators of the system sell their overvalued stocks ( dump for 'get rid of'), the price goes down and the bona fide investors lose their money.

While scammers have relied on cold phone acquisition in the past, the internet now offers a cheaper and easier way to reach a large number of potential investors. One of the best-known cases of fraud using this method was the case of the Stratton Oakmont company , which became the model for the Hollywood film The Wolf of Wall Street .

Individual evidence

1. ^ "Pump-and-Dumps" and Market Manipulations. US Securities and Exchange Commission, accessed May 11, 2017 .