pump-and-dump scheme

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Definition

Noun: A fraudulent market manipulation strategy, typically involving securities like stocks or cryptocurrencies. In this scheme, perpetrators artificially inflate ("pump") the price of an asset through false, misleading, or exaggerated statements. Once the price has risen due to increased buying from deceived investors, the perpetrators sell ("dump") their own holdings at the inflated price, causing the price to collapse and resulting in significant losses for the other investors.

Usage Examples
  • The Securities and Exchange Commission (SEC) charged the group with operating a pump-and-dump scheme using social media to hype the stock.
  • New investors should be wary of online tips that could be part of a pump-and-dump scheme.
  • The classic pump-and-dump scheme relies on spreading exciting but fabricated news to create a buying frenzy.
Advanced Usage
  • The term is often used as a compound modifier: "pump-and-dump operation," "pump-and-dump tactics," or "pump-and-dump scam."
    • Regulators are cracking down on pump-and-dump activities in the cryptocurrency markets.
  • The verbs "to pump" and "to dump" can be used separately to describe the phases of the scheme.
    • The group pumped the stock with fake press releases before they dumped their shares.
Variants and Related Words
  • Pump-and-dump (adjective): Describing anything related to such a scheme (e.g., pump-and-dump fraud, pump-and-dump group).
  • Market manipulation: The broader, legal term for this type of fraudulent activity.
  • Securities fraud: A category of illegal acts involving deceptive practices in the stock or securities markets, which includes pump-and-dump schemes.
Synonyms
  • Stock manipulation scam
  • Boiler room scam (a specific type often using high-pressure telephone sales)
  • Securities fraud
Related Idioms/Phrases
  • "Buy the rumor, sell the news": This is a legitimate, though risky, trading strategy that is sometimes confused with or exploited by pump-and-dump schemers. The schemers create the "rumor" (the pump) and are the ones who "sell the news" (the dump).
  • "A house of cards": This idiom describes something unstable and destined to collapse, much like the inflated price in a pump-and-dump scheme once the support is removed.
Noun
  1. an illegal scheme for making money by manipulating stock prices; the schemer persuades other people to buy the stock and then sells it himself as soon as the price of the stock rises