What it is
A pump and dump scheme involves a group of individuals acquiring a low-priced asset, often a thinly traded cryptocurrency or microcap stock. They then promote the asset aggressively through misleading statements, social media, or spam emails to generate excitement and drive up demand. Once the price has significantly risen due to this artificial demand, the manipulators sell their accumulated holdings, "dumping" them onto the market. This sudden selling causes the price to crash, leaving late buyers with substantial losses.
Pump and dump schemes are prevalent in less regulated markets, particularly within the crypto space, where new and obscure tokens can be easily manipulated. News reports often detail enforcement actions by regulators like the SEC against individuals or groups orchestrating these schemes. Retail investors following social media or online forums might encounter coordinated efforts to promote specific tokens. The mechanics involve rapid price spikes on low trading volume, followed by a sharp decline as the initial promoters exit their positions.
Why it matters
Pump and dump schemes can lead to rapid and complete loss of investment. Recognizing the signs protects you from being exploited by market manipulators.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice