What is a Pump and Dump?
There is a thriving cottage industry of merchant bankers and entrepreneurs who specialize in orchestrating reverse mergers. Unfortunately, there are no barriers to entry in this field. Therefore, scams are common place. Some have developed methods to accumulate large positions in the free trading shares of shell companies. A Reverse is consummated with a marginal private company, and the agents of the deal put together a massive publicity campaign designed to create activity in the stock. Unrealistic promises and absurd claims of corporate performance find their way to the public. The enhanced trading volume allows the scam artist to dump his shares on the unsuspecting public, most of whom eventually lose their money once the newly formed public company fails. This scam is commonly known as a “Pump and Dump.” Here’s some recent SEC enforcement action surrounding same. Pump and Dump Cases: http://www.sec.gov/litigation/litreleases/lr17673.htm Securities and Exchange Commission v. Enviro
