#estafas - scams&michriches A pump-and-dump scheme is a type of financial fraud typically associated with stocks, cryptocurrencies, or other securities. It involves artificially inflating the price of an asset (the “pump”) through false or misleading statements or manipulative trading, and then selling off the inflated assets at the higher price (the “dump”) to unsuspecting investors. Once the schemers sell their holdings, the asset’s price typically crashes, leaving other investors with significant losses. Key elements of a pump-and-dump scheme: 1. Pump: The fraudsters spread hype or false information (often through social media, chat rooms, or press releases) to drive up the price of a particular asset. This creates a buying frenzy, attracting investors hoping for quick profits. 2. Dump: Once the price has been artificially inflated, the schemers sell off their holdings at the elevated price, making substantial profits. 3. Collapse: After the schemers have sold their assets, the price typically plummets, leaving late investors with worthless holdings. How it works in practice: • Stock Market: A group of individuals or entities might collaborate to buy large quantities of a thinly traded stock and then spread rumors or misleading news to drive interest. Once the price increases, they sell their shares, causing the stock to crash as demand dries up. • Cryptocurrency: In the crypto world, “pump groups” sometimes coordinate to manipulate the price of lesser-known altcoins. They may use social media platforms like Twitter or Telegram to spread hype, and once the price spikes, they “dump” their holdings for a profit, leaving others to deal with the crash. Legal Implications: Pump-and-dump schemes are illegal in most jurisdictions because they involve market manipulation. Regulators like the U.S. Securities and Exchange Commission (SEC) take enforcement actions against such fraud, with penalties including fines, bans, and imprisonment for those involved. Despite these efforts, pump-and-dump schemes remain a common form of financial fraud, particularly in markets with lower regulatory oversight, such as some smaller-cap stocks or cryptocurrencies.