PnD
1. concept
A pump and dump (PnD) is a fraudulent scheme where the price of an asset is artificially inflated, or 'pumped', to attract investors. Once the price has been pumped, the fraudsters 'dump' or sell their holdings, causing the price to plummet and leaving unsuspecting investors with an asset that is worth far less than they paid for it.
1.1
"Pump and dump schemes often target less liquid assets, where price manipulation is easier. The fraudsters buy the asset, spread positive news to pump the price, then sell their holdings once the price has risen."
2. mechanism
The mechanism of a PnD scheme often involves spreading misleading positive news or rumors about the asset to attract investors and inflate the price. Once the price has been pumped, the fraudsters quickly sell their holdings, causing the price to crash.
2.1
"In a pump and dump scheme, fraudsters might spread rumors of a new partnership or product launch related to the asset. Once the price has been pumped, they sell their holdings, causing the price to crash."
3. prevention
To avoid falling victim to a PnD scheme, investors should be wary of assets with sudden price increases accompanied by positive news or rumors with no credible source. It's also advisable to research the asset's market fundamentals and trading volume.
3.1
"To avoid pump and dump schemes, be wary of assets with sudden price increases that are not backed by credible news or strong market fundamentals."
4. legal
Pump and dump schemes are illegal in many jurisdictions due to their manipulative and deceptive nature. Regulatory bodies like the SEC in the United States actively monitor and take action against such schemes.
4.1
"Pump and dump schemes are illegal and punishable by law. Regulatory bodies like the SEC actively monitor the markets for such schemes and take action against the perpetrators."
* All terms and definitions may update as the Cryptionary improves.
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