A pump-and-dump scam is when someone spreads false or misleading information to drive up the price of a stock, then quickly sells their own shares to make a profit.
How Pump and Dump Scams Work
A pump-and-dump scam has two main steps:
1) “Pump” (create hype)
Scammers spread false or misleading claims to make a stock seem like it’s about to take off. They often push messages like:
- “Buy now"
- “This is a once-in-a-lifetime opportunity.”
2) “Dump” (cash out)
When the price rises, the scammers sell their shares for a profit. After they stop promoting the stock, the price often falls quickly, sometimes in minutes or hours, and other investors can lose money.
Where These Scams Show Up
Pump-and-dump scammers find their victims typically online:
- Social media posts and comments
- Direct messages (DMs)
- Email or “stock tip” newsletters
- Online forums
- Private or encrypted group chats
A common pattern today is: an “investment club” ad leads people into a private group, where scammers then push specific stocks.
The “FOMO” Factor
Scammers rely on FOMO (fear of missing out). They create urgency so people act fast without checking facts. If the stock price starts rising, it can feel like “proof” the tip was real,which pulls in even more buyers and drives the price higher.
Warning Signs to Watch for
Be cautious if you see:
- Pressure to buy immediately or “before it’s too late”
- Claims of “guaranteed” returns
- Big hype about a stock you’ve never heard of
- A stock that suddenly becomes very volatile (huge price swings)
- Promoters telling you to borrow money (like using a HELOC) to invest
- A person who quickly becomes friendly online, then pivots to a “can’t lose” stock tip
What to Do If You Are a Victim
Take these steps immediately to protect your accounts and aid investigations:
- Stop All Activity: Cut off communication with the promoters and stop making trades or transfers.
- Save Evidence: Keep unedited screenshots, chat logs, timestamps, ticker symbols, and trade confirmations.
- Watch for Recovery Scams: Ignore anyone claiming they can retrieve lost funds for a fee. Legitimate agencies never charge to help recover your money lost to a scam.
- File a Complaint with Proper Authorities: Use the information below to alert the proper authorities.
Report Pump and Dump Scams
If you encounter or fall victim to a pump-and-dump scheme, report it immediately to both state and federal regulatory authorities:
- Washington State DFI: File a complaint directly with the Washington Department of Financial Institutions (DFI) Securities Division online or by phone at 1-877-746-4334.
- Other State Securities Regulators: If you don't live in Washington state, find your state securities regulator.
- U.S. Securities and Exchange Commission (SEC): Submit an online tip regarding market manipulation or false stock promotions.
- FBI Internet Crime Complaint Center (IC3): If the scam occurred online, such as via social media, chat apps (Telegram, Discord), or email newsletter, file a report at ic3.gov.