Pump and dump is a scheme that attempts to drive up the price of a stock through recommendations based on false, misleading or wildly exaggerated statements.
The perpetrators of this scheme already have an established position in the company's stock or in cryptocurrencies, and sell their positions after the hype has led to a rise in the stock price. This practice is illegal under securities laws and can result in heavy fines.
Pump and dump was traditionally done by cold calling ( tarthe Wolf of Wall Street). But with the advent of the Internet, this illegal practice has become even more prevalent. Fraudsters post messages online, via Telegram or Discord for example, urging investors to buy shares quickly, with the claim of having inside information that a development will lead to a rise in the share price. Once the buyers step in, the culprits sell their shares, causing the price to fall dramatically. New investors then lose their money.
