Unfortunately Pump and Dump Stock Frauds are Quite Common
Pump and dump is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. These schemes often involve fraudulent sales practices, including high pressure tactics from “boiler room” operations where a small army of sales personnel cold call potential investors using scripts to induce them to purchase stock. The information conveyed to investors often is at best exaggerated and at worst completely fabricated.
The Internet is Increasing the Number of Pump and Dump Stock Frauds
With the advent of the internet, this illegal practice has become even more prevalent, with these stocks are being touted on the internet by unregistered promoters. The promoters of these companies typically hold large amounts of stock and make substantial profits when the stock price rises following intense promotional efforts. Once the price rises, the promoters, insider and brokers sell, realizing their profits.