Pump-and-dump is a manipulative scheme that attempts to boost the price of a stock or security through fake recommendations. These recommendations are based on false, misleading, or greatly exaggerated statements. The perpetrators of a pump-and-dump scheme already have an established position in the company’s stock and will sell their positions after the hype has led to a higher share price.
This practice is illegal based on securities law and can lead to heavy fines. The burgeoning popularity of cryptocurrencies has resulted in the proliferation of pump-and-dump schemes within the industry.