Pump and Dump
IntermediateA pump and dump is a fraudulent scheme in which promoters artificially inflate the price of an asset, usually a little-known share or cryptocurrency, through false or misleading hype, then sell their holdings at the inflated price.
Pump and dump schemes typically target assets with low prices and low trading volumes, which are easier to move. The promoters buy cheaply, then promote the asset aggressively through emails, social media, online forums or paid influencers, often with exaggerated claims about upcoming news, new products or guaranteed gains.
As new buyers rush in, the price rises. The promoters then sell, or dump, their holdings at the high price. Once the selling begins and the hype stops, the price usually collapses, leaving later buyers with heavy losses.
For example, promoters might buy shares in a tiny company at 0.10, spread rumours of a major partnership, push the price to 0.80 and then sell, after which the shares fall back below 0.10.
Pump and dump schemes are illegal market manipulation in most countries. Warning signs include unsolicited tips, pressure to buy quickly, promises of huge returns and promotions of obscure assets with little public information.
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