Pump and Dump (P&D) Scheme
Pump and dump schemes, also known as P&D scams or stock frauds, are a form of market manipulation that involve artificially inflating the prices of certain assets in order to create an artificial “pump” in their value. This is generally done through coordinated buying by members of a “pumping group” who will then sell off their holdings at a higher price after the pump has been created. The purpose of these schemes is typically to make quick profits for those taking part in them while leaving other investors with losses.
The most common type of pump and dump scheme involves cryptocurrency markets, particularly those involving lesser-known altcoins which may be more vulnerable to manipulation due to lower liquidity levels. These pumps can often take place over short periods of time on exchanges such as Binance or Bitfinex, with large volumes being bought up by the pumping group before they quickly move onto selling off their assets when the desired price level is achieved. Pumping groups may use various tactics such as posting false information about a particular coin on social media platforms or messaging apps in order to encourage others to join in on the pump before it occurs.
It should be noted that this practice is highly illegal and carries heavy penalties for those found guilty including fines, imprisonment, seizure of assets and even permanently banned from trading altogether – making it important for all traders involved in cryptocurrencies to ensure they fully understand what constitutes market manipulation before engaging any activity related with it. Furthermore, investors should always do their own research into any asset they plan on investing into so that they have a full understanding its potential risk/reward parameters prior to investing any money into it – regardless if there are rumors circulating around about possible pumps happening soon or not.
