Tackling the Proliferation of Pump & Dump Schemes https://www.shieldfc.com/
Market manipulation schemes referred to as ‘pump and dump’ are not new. In fact, concerns were being raised in the US Senate as early as the 1930s, but what is new are some of the ways in which these fraudulent schemes are now being run. But before we get into the details, let’s get back to basics….
Emma Parry
What is a ‘Pump & Dump’ scheme? Pump and dump’ (also referred to as ‘ramp and dump’) schemes essentially have two parts. Firstly, the perpetrators orchestrate a campaign to inflate (‘pump’) the price of a stock with false or misleading information.
How big is the issue? Pump and dump schemes have proliferated in the day trading boom we’ve witnessed during the COVID-19 pandemic. In fact, in September 2020, the Hong Kong Securities and Futures Commission (SFC), estimated that 20% of the market manipulation cases it was investigating were pump and dump schemes. Warnings have been issued by everyone ranging from the US Federal Bureau of Investigation to the UK’s Financial Conduct Authority.
Who do you turn to for investment advice? Social media platforms are, of course, the perfect vehicle for the effective and targeted dissemination of false and misleading information urging followers to buy a certain stock or crypto asset. They are also, and increasingly, the venues for people to access insights and opinions over mainstream media and other trusted sources.
Are perpetrators being prosecuted? Yes, there are a number of cases currently in the courts. Here are details of just two: In the first case, the perpetrator, using the alias “Alex DeLarge,” used a Twitter account to promote certain stocks and to disseminate false and misleading information to encourage his over 70,000 followers to buy certain stocks.
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