Pump and Dump Scheme Lawyer: Defend the Charges (2024)

Securities Fraud Attorney Explains the Criminal Consequences of Pump and Dump

What is Pump and Dump?

Pump and dump schemes are a type of investment fraud that can result in serious federal charges. A pump and dump scam often iPump and Dump Scheme Lawyer: Defend the Charges (1)nvolves penny stocks or stocks sold on the microcap market. The scheme likely involves multiple parties working together to commit fraud against investors. If you are involved in any part of the pump and dump scam, you can face serious criminal charges.

While pump and dump schemes can lead to jail time and significant financial penalties, prosecutors must prove beyond a reasonable doubt that you broke the law. These types of cases can be very complicated for prosecutors to prove, especially because prosecutors usually must demonstrate intent in order for you to be found guilty of an offense. There are ways you can defend yourself but you need to know the laws and have an understanding of how to present legal arguments related to complex financial crimes.

An experienced New York City securities fraud defense lawyer at Bukh Law Firm can provide information about your options for defending yourself and can provide representation throughout your case as you handle criminal charges.

How Does a Pump and Dump Scheme Work?

A pump and dump scam involves the purchase of shares of stock with the intention of artificially driving up the price of that stock. The most common type of scam is a penny stock pump and dump. A low value stock sold on the over-the-counter market (the microcap market) is chosen. Large volumes of the stock are purchased at rock bottom prices. The company and its stock shares are then heavily marketed and promoted. False reports may be prepared touting the company’s expected success or the value of the stock. Brokers may call clients and push the stock; fake posts may be made in online investment chat rooms; and a host of other techniques may be used to convince investors to buy the stock.

The aggressive marketing of the chosen stock is the pump part of the scam. As investors buy the shares based on the inaccurate information and marketing campaign, the price of the stock is driven up considerably. The initial investors involved in the scam who purchased at a low price will then sell at a high price. Once the stock is sold, the pumping stops and the share price plummets. Investors who own shares when the stock price falls can face significant financial loss.

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Is Pump and Dump Illegal?

There are a variety of laws that make pump and dump illegal including:

  • Section 17(A) of the Securities Act of 1933:
    The Securities Act prohibits anyone involved in selling or offering securities to participate in a scheme to defraud. Section 17(A) specifically criminalizes making material misstatements, omitting material facts, or otherwise participating in a scheme to defraud potential purchasers of securities.
  • Rule 10b-5 of the Securities Exchange Act of 1934: The Securities Exchange Act broadly prohibits any fraud, material misstatements, or material omissions in connection with the purchase or sale of securities.
  • 18 U.S. Code Section 1343: This wire fraud statute criminalizes any fraud scheme that uses wire, radio, or television communications. If the Internet is used as part of a pump and dump scheme or if faxes are sent out to pump a stock, you can be charged with this offense.
  • 18 U.S. Code Section 1341: This statute broadly prohibits fraud and swindles, including fraud schemes using the postal service. If false reports about the company or other marketing materials were sent via mail, you may be charged with postal fraud.

These are just a few possible federal charges that could result from participation in a pump and dump scheme. Market manipulation including pump and dump scams is illegal on both the federal and state level and penalties if convicted could include a lengthy prison term.

Getting Help from an Investment Fraud Lawyer

When you are accused of participation in a pump and dump scam, it is up to you to explore options for responding to charges. At Bukh Law Firm, PLLC, our experienced New York securities fraud defense lawyers have provided legal representation to many clients accused of serious white collar criminal activities including various types of investment frauds.

We know the law inside and out and will work hard to help you fight conviction for allegedly manipulating the price of a stock. Call today to schedule a consultation and learn how we can help you.

Pump and Dump Scheme Lawyer: Defend the Charges (2024)


Can you sue someone for a pump and dump? ›

Victims of pump and dump schemes can take legal action to recover losses: Civil Lawsuits: Investors can file a civil lawsuit against the perpetrators to recover losses. The basis of such lawsuits typically involves allegations of fraud and misrepresentation.

How do I report a pump and dump scheme? ›

If you believe you may have been the victim of fraud, or to report suspicious activity, contact us at 866.366. 2382 or visit CFTC.gov/Complaint.

Is pumping and dumping illegal? ›

Key Takeaways. Pump-and-dump is an illegal scheme to boost a stock's or security's price based on false, misleading, or greatly exaggerated statements. Pump-and-dump schemes usually target micro- and small-cap stocks. People found guilty of running pump-and-dump schemes are subject to heavy fines.

What is a real life example of a pump and dump scheme? ›

In the early 1990s the penny-stock brokerage Stratton Oakmont artificially inflated the price of owned stock through false and misleading positive statements in order to sell the cheaply purchased stock at a higher price. Firm co-founder Jordan Belfort was criminally convicted for his role in the scheme.

What is the punishment for pump and dump? ›

If you are involved in any part of the pump and dump scam, you can face serious criminal charges. While pump and dump schemes can lead to jail time and significant financial penalties, prosecutors must prove beyond a reasonable doubt that you broke the law.

What are the consequences of pump and dump? ›

Bottom line. Pump-and-dump schemes are a common form of market manipulation and fraud that can result in major financial losses for unsuspecting investors. To avoid falling victim to these scams, it's crucial to do your own research, use common sense and be cautious of hyped-up investments.

How can you protect yourself from pump and dump scheme? ›

How can investors protect themselves? Experts suggest that investors must exercise caution with unsolicited investment offers from unknown sources, as these are often indicative of a pump and dump scheme. Investors must do their research before investing in the stock market.

Why are pump and dump schemes illegal? ›

Participating in any part of a P&D scheme can violate a number of federal securities laws including Section 10b-5 of the Securities Exchange Act of 1934, which broadly prohibits any fraud, material misstatements, or material omissions in connection with the purchase or sale of securities, and the Securities Act of 1933 ...

How to recover from pump and dump? ›

If your broker or advisor steered you toward a pump and dump scheme, you may be entitled to recover your losses in FINRA arbitration. When you contact us, our pump and dump scheme lawyers will thoroughly assess your legal rights, and we will pursue all available claims on your behalf.

What is the rule for pump and dump? ›

There is a good time to pump and dump: when your breasts are too engorged and they are becoming painful. If your baby isn't hungry and you don't have a place to store your extra milk for later, there's no reason to be uncomfortable. Pump until you feel comfortable again, then dispose of the extra milk.

How long can a pump and dump last? ›

How long does a pump and dump last? That depends on what the pump and dump groups agree on, some only last a few minutes while others can last a few hours.

What can I do instead of pump and dump? ›

Milk baths are a really popular option for using "pump and dump" or expired breast milk! If you're looking for a way to still use your breast milk for your baby, you can try this option. Simply fill up a normal bath and then pour whatever breast milk you want to use in and mix it around.

What is the pump and dump scandal? ›

In the first, promoters try to boost the price of a stock with false or misleading statements about the company. Once the stock price has been pumped up, fraudsters move on to the second part, where they seek to profit by selling their own holdings of the stock, dumping shares into the market.

What is the opposite of a pump and dump scheme? ›

Understanding Poop and Scoop

“Poop and scoop” is the opposite of a "pump and dump," in which one or more individuals will spread false information on a security in the hope that it will artificially raise the price so they can sell their position at a much higher price.

Is flipping stocks illegal? ›

In the case of flipping stocks from an initial public offering (IPO), buyers are sometimes able to make a profit on these shares because of the scarcity. Investors should be aware that while flipping IPOs isn't against the law, it is often frowned upon by underwriters and issuing companies.

Is joining a pump and dump illegal? ›

Most people know the adage, “Buy low, sell high.” Pump and dump schemes are a form of illegal market manipulation in which fraudsters buy stocks at a low price, then do a blast of marketing to get others to buy them and thus “pump up” the stock price.

Can you sue someone for dumping you? ›

Let's get one thing out of the way: no, your ex does not have any legal obligation to stay with you. If you're not happy in your relationship, you can leave without fear of your ex suing you—assuming you don't intentionally emotionally torment your ex during the breakup.

What is a pump and dump lawsuit? ›

“Pump-and-dump” (“P&D”) schemes are schemes that involve artificially inflating the price of a stock by publicly touting false and misleading statements to the market place, and then selling the stock in order to make a profit.

What is considered a pump and dump? ›

In a pump and dump scheme, fraudsters typically spread false or misleading information to create a buying frenzy that will “pump” up the price of a stock and then “dump” shares of the stock by selling their own shares at the inflated price.


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