Jan. 23, 2021
Here is the article.
A pump and dump scam is the illegal act of an investor or group of investors promoting a stock they hold and selling once the stock price has risen following the surge in interest as a result of the endorsement. Here, we take a closer look at how pump-and-dump schemes work and how to avoid them.
KEY TAKEAWAYS
- Pump-and-dump is a scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements.
- The favored medium of communication for traders involved in pump-and-dump are social media platforms or anonymized messaging apps like Telegram and Discord.
- Promoters of the scheme will then begin to coordinate rumors, misinformation, or hype in order to artificially increase interest in the security, driving up its price.
- Then, once the price of the stock has been increased sufficiently by unsuspecting marks, the promoters then sell the stock at high prices.
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