What is Market Manipulation Fraud – aka “Pump and Dump”?
Market Manipulation Fraud, also known as “Pump and Dump,” is a form of stock fraud that “creates artificial buying pressure for a targeted security, generally a low-trading volume issuer in the over-the-counter securities market largely controlled by the fraud perpetrators.” Investors are typically induced into purchasing the shares through false or deceptive sales practices. The increase in trading volume causes the price of the targeted security to increase. This is the “pump.” The stock is then rapidly sold off by the fraud perpetrators, yielding a high rate of return for the perpetrator and losses to the investors. This is the “dump.”
When Does Pump and Dump Fraud Occur?
Fraud occurs when someone attempts to artificially inflate the price of the stock by disseminating inaccurate or misleading information so that their own shares can be sold at a higher profit. When the people being the market manipulation scheme stop promoting the stock and sell their shares, the price then plummets and the other investors are left with shares that are worth far less than the amount they invested.
Market Manipulation Fraud is a white collar crime that can be prosecuted by federal authorities. The pump and dump violates securities laws and can lead to large fines.
How is Pump and Dump Fraud Accomplished?
The pump and dump scam is typically accomplished by using penny stocks, those that are traded “over the counter” in such markets as the OTC Bulletin Board or the Pink Sheets. These stocks are not exchanged on major markets such as the NASDAQ or the New York Stock Exchange, and are therefore traded with less oversight and fewer regulations.
Further, disseminating false stock information is easily accomplished via the internet. A pump and dump scam can be carried out by the use of spam e-mail messages. The scammer buys the stock at a low price before artificially driving up the trading volume and value, then sells the stock soon after the spam e-mails are sent.
If you have been charged with pump and dump market manipulation, or are currently under investigation, it is essential that you contact an experienced white collar defense attorney as soon as possible. At Ashley D. Adams, PLC our experienced attorneys will protect your rights and provide you with the best criminal defense available. Contact us today to schedule a case evaluation.
The attorneys at Ashley D. Adams, PLC handle state criminal cases throughout Arizona including the cities of Phoenix, Scottsdale, Glendale, Mesa, Tempe, Ahwatukee, Maricopa, Gilbert, Peoria, Surprise, Goodyear, Litchfield Park, Avondale, Chandler, Casa Grande, Florence, Queen Creek, Deer Valley, North Pinal and Sun City as well as those living in and around Maricopa County, Pinal County, Pima County, Yuma County and Yavapai County.
The attorneys at Ashley D. Adams, PLC handle federal criminal cases throughout the United States, including Arizona, Oklahoma, Utah, and California.