HOW PUMP AND DUMP SCAM WORKS
a) You need a worthless stock, with a tight float and which is thinly traded. Small companies are needed as a precondition. Tight float means that most of the stocks are held by insiders and promoters and not by the general public. The reason for this is that it is much easier to manipulate the price of the stock when there are fewer stocks held by the general public since fewer buying of stock is needed to increase the price. You now buy an otherwise worthless stock at low prices. This sets the stage for to make money when the stock price elevates.
b) You start a promotional campaign to create interest in the stock. You use advertising campaigns, cold calls, newsletters, newsgroups, message boards, chat rooms, emails, seminars and any other media to promote the stock. Information used to promote the stock is said to be a rumor, inside information or your unbeatable technical and economical analysis. Investors are being enticed with visions of making the big score, quickly and without much risk. Your promotions will make investors swim in the water of excitement. Essentially, you are playing on the investors strings of greed to try to make the investors feel that he can’t miss the next great investment play.
c) You now attempt to increase the price of a stock. The stock chosen is thinly traded, so you and insiders can quietly raise the price by buying up the stock. Instead of putting bid offers at lower prices, they take the ask bids out and go up the price ladder. Since there is little public float, it doesn’t take a lot of buying to get the price up.
d) You have increased the price of a stock and now dump it at a higher level. You leave with a high profit, while other investors face a sharp ride to the south.
Please read the following ling