Pump and Dump
Adapted from Wikipedia, the free encyclopedia.
The financial fraud known as pump and dump involves artificially inflating
the price of a stock or other security through promotion, in order to sell at the
inflated price. This practice is illegal under securities law, yet it is particularly
One example of a highly successful pump-and-dump operator is Jonathan Lebed. Lebed
was 15 years old when the SEC accused him of manipulating several securities
he settled the charges by paying a fraction of his total gains. While Lebed has many
apologists, who note that his promotional activities are similar to those used by
analysts every day, they fail to take into account that he not only made false and
misleading statements about companies, but purchased enough shares to temporarily
move the market, creating an artificial burst of activity that provoked investor interest.
In fiction, a good example of how this works can be seen in the movie Boiler Room.
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