Pump and Dump Scheme Lawyer: Defend the Charges (2024)

Securities Fraud Attorney Explains the Criminal Consequences of Pump and Dump

What is Pump and Dump?

Pump and dump schemes are a type of investment fraud that can result in serious federal charges. A pump and dump scam often involves penny stocks or stocks sold on the microcap market. The scheme likely involves multiple parties working together to commit fraud against investors. If you are involved in any part of the pump and dump scam, you can face serious criminal charges.

While pump and dump schemes can lead to jail time and significant financial penalties, prosecutors must prove beyond a reasonable doubt that you broke the law. These types of cases can be very complicated for prosecutors to prove, especially because prosecutors usually must demonstrate intent in order for you to be found guilty of an offense. There are ways you can defend yourself but you need to know the laws and have an understanding of how to present legal arguments related to complex financial crimes.

An experienced New York City securities fraud defense lawyer at Bukh Law Firm can provide information about your options for defending yourself and can provide representation throughout your case as you handle criminal charges.

How Does a Pump and Dump Scheme Work?

A pump and dump scam involves the purchase of shares of stock with the intention of artificially driving up the price of that stock. The most common type of scam is a penny stock pump and dump. A low value stock sold on the over-the-counter market (the microcap market) is chosen. Large volumes of the stock are purchased at rock bottom prices. The company and its stock shares are then heavily marketed and promoted. False reports may be prepared touting the company’s expected success or the value of the stock. Brokers may call clients and push the stock; fake posts may be made in online investment chat rooms; and a host of other techniques may be used to convince investors to buy the stock.

The aggressive marketing of the chosen stock is the pump part of the scam. As investors buy the shares based on the inaccurate information and marketing campaign, the price of the stock is driven up considerably. The initial investors involved in the scam who purchased at a low price will then sell at a high price. Once the stock is sold, the pumping stops and the share price plummets. Investors who own shares when the stock price falls can face significant financial loss.

Is Pump and Dump Illegal?

There are a variety of laws that make pump and dump illegal including:

• Section 17(A) of the Securities Act of 1933:
  The Securities Act prohibits anyone involved in selling or offering securities to participate in a scheme to defraud. Section 17(A) specifically criminalizes making material misstatements, omitting material facts, or otherwise participating in a scheme to defraud potential purchasers of securities.
• Rule 10b-5 of the Securities Exchange Act of 1934: The Securities Exchange Act broadly prohibits any fraud, material misstatements, or material omissions in connection with the purchase or sale of securities.
• 18 U.S. Code Section 1343: This wire fraud statute criminalizes any fraud scheme that uses wire, radio, or television communications. If the Internet is used as part of a pump and dump scheme or if faxes are sent out to pump a stock, you can be charged with this offense.
• 18 U.S. Code Section 1341: This statute broadly prohibits fraud and swindles, including fraud schemes using the postal service. If false reports about the company or other marketing materials were sent via mail, you may be charged with postal fraud.

These are just a few possible federal charges that could result from participation in a pump and dump scheme. Market manipulation including pump and dump scams is illegal on both the federal and state level and penalties if convicted could include a lengthy prison term.

Getting Help from an Investment Fraud Lawyer

When you are accused of participation in a pump and dump scam, it is up to you to explore options for responding to charges. At Bukh Law Firm, PLLC, our experienced New York securities fraud defense lawyers have provided legal representation to many clients accused of serious white collar criminal activities including various types of investment frauds.

We know the law inside and out and will work hard to help you fight conviction for allegedly manipulating the price of a stock. Call today to schedule a consultation and learn how we can help you.