Whats a “pump-and-dump” scheme?
In a classic “pump-and-dump” scheme, a fake company is set up by fraudsters who then promote the stock heavily, often through mail and news. Naive investors buy in, raising the share price. The fraudsters then sell their holdings, after which the company collapses. The term “pump-and-dump” is now also applied to cases where a legitimate company is ‘pumped’ by third parties who have bought shares in it. Again, the goal of the people involved is to raise the company’s share price temporarily so that they can make a profit on the shares they have purchased.
