What is Pump and Dump?

A pump and dump is market manipulation where fraudsters artificially inflate (pump) the price of a stock or crypto through false hype, misleading promotions, or coordinated buying — then sell (dump) their shares at the inflated price, leaving other investors with worthless or devalued assets. It's illegal in securities markets and rampant in crypto.

The orchestrators accumulate a position in a low-liquidity asset, then launch a marketing campaign: fake news, social media hype, influencer promotions, Telegram groups claiming 'inside information.' Retail investors FOMO in, driving the price up. The orchestrators sell into the buying frenzy and disappear. Retail is left holding the bag.

Red flags: sudden unexplained price spike in a low-volume stock or obscure crypto, aggressive unsolicited promotion, claims of 'next 100x' or 'insider tip', anonymous promoters. If someone is aggressively telling you to buy something, ask who benefits from you buying. The answer is usually not you.

In traditional securities markets, yes — pump and dump is explicitly illegal under securities fraud laws in the US, EU, and most jurisdictions. Crypto is a grayer area: many tokens operate outside securities regulations, making pump and dumps technically legal (if ethically reprehensible). Regulators are increasingly treating certain crypto assets as securities.

Classic examples: Jordan Belfort (Wolf of Wall Street) ran penny stock pump and dumps in the 1990s. More recently, celebrity-promoted meme coins (various Kardashian and influencer-shilled tokens) were essentially pump and dumps. The SEC has charged dozens of crypto influencers. Larry considers it the oldest scam in finance with the newest packaging.