Pump and dump

[El Barto]

After Cracked's article this morning, I was reading about this guy.  He'd buy penny stocks, and then go online and tout them to everybody encouraging them to buy, then he'd sell his.  I don't get how this is illegal.  I get that he was artificially inflating the value of the stocks, but he wasn't doing anything to accomplish that other than telling people they should buy them.  I see no fraud in any of that.  Frankly, it should be up to the consumer to do diligent research and not buy penny stocks because some kid on the internet tells them to.  If we're to start prosecuting people for telling people a product is better than it is, then wouldn't that make every single person in commissioned sales a criminal? 

Anybody want to help me understand this better?

[jsem]

Inb4 this thread is moved to P/R. I agree with you though.

But the idea of the illegality is to protect the investors so they don't get "scammed". I guess. Kinda, protecting them from themselves.

[senecadawg2]

Is it somewhat of a 'scam'? Sure.... However, I agree with you in that it is the individuals' responsibility to conduct sufficient research and make their own decisions. If people are dumb enough to invest only on the word of a stranger over the internet, then that's there loss.

[El Barto]

I don't see how it's a scam.  This sort of thing happens in retail all the time.  Ever seen a place that has going out of business sales every three months?  How bout those Franklin Mint assholes?

[Fiery Winds]

Or how about all those commercials telling you, "Buy gold now!  It's going to skyrocket as the dollar plummets!".  Then a months/years later, they buy back your gold for pennies on the dollar only to repeat the cycle.

[ReaperKK]

I also don't see how this is illegal.

As someone who makes a living off trading stocks (among other things) its my job as a retail trader to do my research before buying. Buying because someone is telling me to buy is as foolish as someone telling me to hit at a blackjack table while I'm holding a 20.

[Cable]

Inb4 this thread is moved to P/R. I agree with you though.

But the idea of the illegality is to protect the investors so they don't get "scammed". I guess. Kinda, protecting them from themselves.

Yup. In a way, it is close to false advertising.

Sure, it is not a Ponzi scheme, or fake stocks period. But it is selling something that is not actually as advertised.

And I do agree that buyers should do more homework. Think though how Ponzi and Madoff got the money, and just how many believed in Madoff. They probably advertised their options as quite legitimate...similar to penny stocks, just that those stocks are real.

[El Barto]

False advertising is as American as apple pie, though.  You can't make patently untrue claims, but you can certainly mislead people about the value or importance of something.  What this kid did isn't any different than convincing somebody to buy 3 cans of Scotchguard for $500 by telling them that it'll protect the value of their new car; something that happens daily. 

[Sir GuitarCozmo]

I thought for sure by the title that this thread was about one night stands.

[King Postwhore]

I thought for sure by the title that this thread was about one night stands.

No dumping in one night stands.  More like leaving the money on the dresser drawers.

[rumborak]

I thought for sure by the title that this thread was about one night stands.

I thought it was about a completely different practice (which still strikes me as undoable, even though I've never tried).

rumborak

[Sigz]

I thought for sure by the title that this thread was about one night stands.

I thought it was about a completely different practice (which still strikes me as undoable, even though I've never tried).

rumborak

Ah yes, the pump and dump, also known as the Mexican Halloween. A classic.