Pump and dump schemes

Stock promoters and manipulators first purchase large quantities of stock, then, artificially inflate the share price through false and misleading positive statements. Pump and dump is a common form of microcap stock fraud, though in more sophisticated versions individuals or organizations buy millions of shares, then use newsletter websites, chat rooms, stock message boards, press releases, or e-mail blasts to drive up interest in the stock. Very often, the perpetrator will claim to have "inside" information about impending news to persuade the unwitting investor to quickly buy the shares. When buying pressure pushes the share price up, the rise in price entices more people to believe the hype and to buy shares as well. Eventually the manipulators do the "pumping" end up "dumping" when they sell their holdings. The expanding use of the Internet and personal communication devices has made penny stock scams easier to perpetrate.