Today I will discuss How much is pump and dump? The world is growing faster, and there is a thriving competition every day. Each day, we have to work even harder to make our businesses successful. Many people invest in becoming shareholders. But, not every shareholder becomes successful. The reason is many people look for shortcuts and escape hard work. They trick buyers and manifest they are the best to work with, but the reality is the opposite. They grab buyers by applying the scheme of pump-and-dump.
What is a Pump and Dump?
When an investor or a bunch of investors carries an illegal act by increasing the stock price through recommendations built on false or misleading statements, people who are part of pump-and-dump schemes are charged with heavy fines once they are caught.
The SEC charged the former CEO of Jammin’ Java, a US company because he was involved in the pump and dump practices. He illegally earned over US$75 million of profits. The CEO was then involved in scam promotional campaigns to increase the stock price. He took advantage of his previous position and also run a scam campaign. SEC observed Jammin’ Java’s administration understood the betrayal when it observed a decrease in stock rates a few days later. By this time, the dumping of the already extravagant stocks had taken place. But this is only illegal for stocks and not for cryptocurrencies.
How does the Pump and Dump happen?
The pump-and-dump happens in two parts.
PUMP: the pump group members manifest messages that encourage buyers to purchase a stock rapidly by claiming they are accessible to confidential data.
DUMP: once the costs escalate, the perpetrators sell their share at high rates. New shareholders then lose their money if the costs decrease dramatically after the traders sell their shares.
Types of Pump and Dump:
There are different ways of carrying the practice of pump-and-dump. Few of its types are following.
Classic Pump and Dump Schemes:
These types include any manipulated information about a company and its stock—for example, false news release or release of inside information that pumps the stock price.
This type includes attracting buyers by using fake names. They use temporary phone numbers and mailboxes to manipulate people, and once they are successful in trapping enough buyers and sell all their stock. They disconnect their phone numbers.
WRONG NUMBER SCHEME:
In this type, the targeted people receive voicemails from unknown people with a HOT investment suggestion to a friend. The scammers make the targeted people believe that they received voice mail accidentally on their mobile phones. However, it is a deliberate act to trap the investors and escalate the demand for the stock.
Sescure yourself from the Pump and Dump Trap:
It is very challenging to secure yourself from the pump-and-dump trap, but it is still possible. When you try to participate in Pump and Dump without a program that improves your performance and helps you to avoide losses.
DO NOT ACCEPT OFFER IMMEDIATELY:
Whenever you get an offer on the internet, research is whether it is legitimate or a scam. Do not fall for the offer immediately if sent by an unknown sender via email or through promotional material such as blogs. These people are paid for trapping each person.
Research about the owner of the company:
Research about the owner of the company before you invest. Suppose you see any news report related to the company that indicates a red flag. Immediately drop the idea of buying shares from that company.
Many leading companies file reports with the SEC. Filing periodic reports, including financials, with the SEC is not mandatory for most companies whose stock trades in the over-the-market because they may be too minor or have fewer shareholders. Make sure the SEC’s EDGAR database knows whether the company files with the SEC. He must authenticate these reports against promotional data the company or its promoters have sent you and practice carefulness if they don’t align.
INVESTIGATE THE OPPORTUNITY:
Stay vigilant from those offers where an unknown person pressurizes you to attain it. Before investing in anything, investigate the opportunity.
Finally, we learn How much is pump and dump? Suppose an unknown person approaches you and offers you a hot stock tip. Think about it and ask yourself.
Why are they offering this only to you and not the other investors? How can I be beneficial for them in trading?
This thought might help you in not getting into the trap of the scammers.