TLDR:
Pump and dump is a fraudulent investment scheme where perpetrators artificially inflate the price of an asset through misleading promotions, then sell their holdings at the inflated price, leaving other investors with losses.
Pump and Dump Regulation and Detection
Securities regulators have developed increasingly sophisticated tools to detect pump and dump schemes. The SEC’s data analytics team monitors trading patterns, social media activity, and newsletter dissemination for coordinated manipulation. Common red flags include dramatic volume spikes in low-liquidity stocks, coordinated social media promotion by accounts with no prior history, sudden dramatic price increases with no fundamental news, and insiders or promoters holding large undisclosed positions. Criminal penalties for pump and dump include substantial fines and imprisonment.