Pump and dump
Fraudsters spread false or misleading information to inflate a stock's price, then sell their own shares at the high price, leaving other investors with losses when the price falls.
The SEC describes a pump and dump as a scheme in which fraudsters typically spread false or misleading information to create a buying frenzy that pumps up a stock’s price, then dump their own shares at the inflated price. Once they stop hyping the stock, the price typically falls and investors lose money. The false information can travel through social media, investment research websites, newsletters, online ads, email, chat rooms, direct mail, newspapers, magazines and radio. The SEC says microcap companies are particularly vulnerable because little public information exists about them.
The FBI warned in 2025 of a variant it calls ramp-and-dump. Victims are drawn by social media ads or unexpected messages into an online investment club on a secure messaging app, sometimes populated by bots or fake accounts. The perpetrators secretly control a large volume of a low-priced stock and urge members to buy over weeks or months, then sell once the price is high. The FBI said that so far in 2025 complaints referencing ramp-and-dump fraud had risen by at least 300 percent from 2024.
Warning signs the FBI lists: an unsolicited tip that arrives by an apparently accidental text, an offer of exclusive picks from a supposed well-known adviser, pressure to act fast on a supposed market-moving event, and promises to cover your losses.
Where it shows up
- Pump and dump, and finfluencer manipulation · Real shares, bought through your own broker, from people who needed a buyer.
Sources
- Pump and Dump Schemes. US Securities and Exchange Commission (Investor.gov). Accessed 2026-10-10. Supports: The definition, the channels used to spread false information, and why microcap companies are vulnerable.
- Fraudsters Target US Stock Investors through Investment Clubs Accessed on Social Media and Messaging Applications. FBI Internet Crime Complaint Center (IC3). Accessed 2026-10-10. Supports: The ramp-and-dump variant, the investment-club method and the red flags.