"Pump and Dump" is a type of micro-cap stock fraud involving the use of false or misleading statements to increase stock prices and then sell the inflated stocks to the public. Micro-cap stock refers to companies with low capitalizations and typically limited assets. Many microcap stocks trade on the over-the-counter market. Microcap stocks often lack reliable, publicly available information about the company and have a limited historical record. The most common "pump and dump" scheme involves artificially inflating the price of a stock through false and misleading positive statements in order to sell the cheaply purchased stock at a higher price. Promoters may claim to have "inside" information, but in reality they may be paid by companies or may stand to gain a profit when they sell their grossly overvalued stocks. Promotion methods may include unsolicited e-mails, faxes, phone calls, or voice mail messages. Once promoters "dump" their stocks, prices eventually fall and investors lose their money.
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