“Pump and dump” is a market manipulation scam that has been around for many years, but has recently exploded through global internet use. As a form of stock fraud, pump and dump is a white collar crime that can be prosecuted by federal authorities. Pumping and dumping violates securities laws and can lead to large fines. If you have been charged with pump and dump market manipulation, or are currently under investigation, it is essential that you contact an Arizona attorney as soon a possible. At the Law Offices of Ashley D. Adams, our experienced Arizona attorney will protect your rights and provide you with the best criminal defense available.
Pump and dump is a form of stock fraud that involves “microcap” companies. These are companies with a market capitalization of under $250 million. The majority of microcap stocks are called penny stocks, which trade at or below $1 a share. 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 behind the scheme sell their shares and stop promoting the stock, the price plummets and other investors are left with practically worthless shares.
The pump and dump scam is easily accomplished because penny stocks are generally traded “over the counter” in such markets as the OTC Bulletin Board or the Pink Sheets, rather than major markets such as the NSDAQ or the New York Stock Exchange. OTCBB and Pink Sheet stocks have less regulations and oversight and it is easier to manipulate a stock when there is little or no independent information about the company.
In the distant past, penny stocks were sold on the street corner. In more modern times, telemarketing was the preferred choice for disseminating false stock information until the advent of the internet. Pump and dump scams have now become very prevalent on the internet and can reach people across the globe. It is estimated that pump and dump stock scams account for approximately 15% of all spam e-mail messages. These stocks are almost always penny stocks that sell for less than $5 per share, are not traded on major exchanges, and are difficult to sell short. Scammers acquire the stock before sending the e-mail messages and then sell the stock soon after the messages are sent. The messages often claim to have inside information that the stock is going to go sky-high in value (which is called insider trading and is illegal in itself). Scammers often talk up the stock on internet bulletin boards or chat rooms to entice people to buy the stocks quickly while they are “hot.”
Pump and dump market manipulation is a form of stock fraud that violates federal securities laws. If you have been charged with this type of fraud crime, you could face serious penalties. The Law Offices of Ashley D. Adams has extensive experience in all types of financial fraud and white collar crimes. Our seasoned Arizona attorney will aggressively defend your rights. Call Arizona Attorney Ashley D. Adams today for a free case evaluation.