A pump and dump scheme is a type of securities fraud where scammers artificially inflate the price of a low‑value stock using false or misleading information, then sell their shares once the price rises, leaving other investors with losses.
Be aware!
Pump and dump schemes are often carried out through social media, online forums, and email campaigns.
Scammers may guarantee high returns without any risk or claim to have access to insider information available only to a select few.
In some cases, scammers pretend to be well‑known public figures or claim to work for a trusted company.
They may use someone else’s name and picture — without the real person’s knowledge — to create fake social media profiles and increase their credibility.
How these schemes typically work
- You may be added to a private investing group and encouraged to invest in low‑value shares, with promises of a quick, high return and no risk.
- These messages often come from unverified sources, such as Facebook, WhatsApp, or Signal groups. Fake profiles of other “investors” may share success stories or show supposed gains to make the scheme appear legitimate.
- Once enough people have invested and the stock price has increased, scammers sell their shares. This often leads to a sharp price drop, leaving other investors with significant losses.
How to protect yourself
- Avoid investment advice from unverified or unknown sources, especially on social media.
- Be sceptical of offers that promise high returns with no risk.
- Never trust an “expert” who guarantees fail‑safe investments.
- Do not rely on “insider information” shared through private groups or direct messages.
- Do not rush decisions based on pressure to act quickly.
- Take time to research both the investment and the source of the recommendation.
- Remember that all trading and investing involves risk, and no outcomes are guaranteed.
Important notes
- Legitimate financial institutions do not guarantee investment returns.
- Scammers may use real names or images without the person’s knowledge to appear credible.
- Fake investor testimonials are commonly used to make schemes seem trustworthy.
Frequently asked questions
Is a pump and dump scheme illegal?
Yes. Pump and dump schemes are a form of securities fraud and are illegal in many jurisdictions.
Can pump and dump schemes involve well‑known companies or individuals?
Scammers may impersonate well‑known individuals or companies, but this does not mean those parties are involved.
Are pump and dump schemes limited to certain markets?
No. These schemes can occur across different markets and instruments, particularly in low‑liquidity stocks.