As mentioned above, manipulating stock prices with misleading information is a scam that often steals victims` hard-earned money. Therefore, it is considered illegal under various laws and laws. Laws such as the Securities Act of 1933 and the Securities Exchange Act of 1934, etc. contain segments to criminalize securities-related misrepresentation and fraud. Jennifer joined LegalMatch in 2020 as a Legal Writer. She holds a J.D. from the Cumberland School of Law and has been a member of the Alabama State Bar since 2012. She is a mediator and certified ad litem tutor. She holds a B.A. in Criminology and Criminal Justice and a B.A.
in Spanish, both from Auburn University. Jennifer`s favorite part of her legal work is research and writing. Jennifer enjoyed being a law clerk for a respected district judge in Alabama. She is a housewife and home teacher of three children. She enjoys reading and taking long evening walks with her husband. Pump and dump is a type of stock market fraud in which false or misleading statements are used to increase stock prices and then sell the inflated shares to the public. Stocks of microcap companies with small caps and limited assets are very sensitive to pump and dump because they can be easily manipulated. Microcap stocks often lack reliable public information about the company and have a limited track record. Many of them trade on over-the-counter (OTC) markets such as OTC Bulletin Board (OTCBB) or OTC Link LLC (OTC Link).
OTC markets are not transparent in transactions and have lax financial standards. The pumping and emptying system was the central theme of two popular movies: “Boiler Room” and “The Wolf of Wall Street.” Both films featured a camp full of telemarketing brokers throwing penny stocks. In any case, the brokerage firm was a market maker and held a large volume of shares of companies with very dubious prospects. Company executives offered incentives to their brokers with high commissions and bonuses to place the shares in as many client accounts as possible. Brokers drove up the price thanks to huge sales volumes. Contact our experienced pumping and emptying litigation attorneys so we can investigate the inventory as well as your broker-dealer to determine if you have any grounds for complaint. Contact us online today or call (800) 259-9010. The cryptocurrency market has become the newest area for pumping and emptying systems. The massive gains of Bitcoin and Ethereum have sparked huge interest in cryptocurrencies of all stripes. Unfortunately, cryptocurrencies are particularly well suited to pumping and emptying systems due to the lack of regulation in the cryptocurrency market, their opacity, and the technical complexity of cryptocurrencies. If you are accused of participating in a pump-and-dump scam, it is up to you to explore options to respond to the charges. At Bukh Law Firm, PLLC, our experienced New York securities fraud lawyers have represented numerous clients accused of serious white-collar crimes, including various types of investment fraud.
A pump-and-dump scam involves buying shares with the intention of artificially inflating the price of those shares. The most common type of scam is a pump and penny stock dump. A low-value stock sold on the over-the-counter market (the microcap market) is chosen. Large quantities of shares are bought at unbeatable prices. The company and its shares are then heavily marketed and promoted. False reports can be created that promote the expected success of the company or the value of the stock. Brokers can call clients and push the stock; fake messages may be created in online investment discussion forums; And a variety of other techniques can be used to convince investors to buy the stock. In many cases, people who are victims of these pumping and dumping schemes lose a significant portion of their pension funds, pension benefits or loan amounts. The victims of these schemes often have good faith and honest belief in the securities in which they invest. The promoter may be the owner of the company or another opportunist.
And as mentioned earlier, broker-dealers and their brokers are known to engage in pump and dump scams. Or, if they don`t do their due diligence, a financial advisor may recommend a stock without knowing that they are promoting a financial program. These systems typically target micro and small cap stocks because they are the easiest to manipulate. Due to the low free float of these types of stocks, it doesn`t take many new buyers to drive a stock higher. Langbar International was founded as a state-owned company and was the largest pump-and-dump scam in the alternative investment market, which is part of the London Stock Exchange.