How the ‘pump’ works

Scammers often target small, low liquidity, small‑cap stocks, or companies that have recently gone public. These companies often have less public information available, making it easier to influence their price without it being noticed.

🚨 Important: Even if a stock doesn’t meet all the above criteria, it can still be involved in a pump and dump scam and not all stocks that fit the above criteria are involved in a pump and dump scam 

While scams may vary as scammers vary their approach to try and stay ahead, we have seen some common themes.  To set the trap: 

• The bad actors quietly buy shares over time, creating the appearance of small, steady gains.
• Once the share price starts rising, they begin heavily promoting the stock.
• This hype usually takes place on social media, group chats, or online forums – anywhere they can reach as many people as possible - and may appear to be supported by credible market personalities.
• They’ll often promise big returns or claim they have ‘insider tips’  to create urgency and FOMO.

With more and more people buying in, the price rises even further that appears to support the claims being made. That’s the pump.

How the ‘dump’ happens

When the scammers decide the price has climbed as high as it’s likely to go — or the hype starts slowing down — they sell all their shares at once. Because they bought early and paid much less, they lock in a profit while the stock is still inflated.

Once they sell, the hype disappears, the price collapses, and unsuspecting investors can be left with steep losses. That’s the dump.

In our experience, the company whose shares are being manipulated often has no idea. These scams are driven by external bad actors, and not the company or its leadership.

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How to protect yourself from pump‑and‑dump scams

1. Learn to spot FOMO

Scammers rely on FOMO, the fear of missing out,  to get people to act fast. If you feel pressured to ‘buy now’, that’s your cue to pause.

Signs of FOMO‑fuelled hype include:

• Urgency: ‘This is about to explode!  Don’t miss out!’
• Guaranteed returns: Claims that the price ‘can only go up.’
• Crowd pressure: Lots of people in comments, chats or groups all repeating the same excitement.
• Unusual buzz: A company you’ve never heard of suddenly becoming the ‘next big thing.’

💡Note: A good rule of thumb: If the excitement feels louder than the facts, step back, take a breath and revisit the facts. Hype is not a strategy.

2. Do your own due diligence

Never rely on what a stranger says about a stock. Scammers want you to take their word as fact, your job is to verify everything, and do your own research.  Scammers may pose as someone that they think you will trust, someone who might not feel like a stranger to you (for example, a well known senior business figure), always verify the identity and credentials of anyone you are taking investment advice from.

Good due diligence includes:

• Understanding the business: What does the company actually do? Does it have customers, revenue, or real products?
• Checking credible sources: Company filings, financial statements, reputable news outlets and official investor updates.
• Looking at trading patterns: Sudden spikes in trade volume without any legitimate news are major red flags.
• Asking yourself ‘Why now?’: If there’s no new information and yet everyone’s suddenly talking about it, that’s a warning sign.
• Asking yourself ‘Why me’: Why am I being given information about this company or stock. Am I being taken advantage of? 

3. Check your investment strategy

One of the best defences against scams is having your own investment strategy.  When you know what your goals are, and what to look for in an investment, it’s much harder for hype to sway you.

A good checklist might include:

• Do I understand this company?
• Does it have solid financials or a realistic path to growth?
• Am I investing because of fundamentals — or because someone online told me to?
• Does this fit my long‑term investing plan?
• What’s my risk tolerance here?

Having an investment strategy keeps you grounded, consistent, and protected from emotional decisions. It acts as your personal filter, helping you invest because you believe in the company, not because someone else is trying to sell you a story.