Pump and Dump Schemes
Promotion of a thinly traded security by holders who intend to sell into the demand they create. The structural features are visible before the promotion arrives.
MadStockAlerts Research · Updated August 29, 2026
What to take away
- The scheme requires a security thin enough for promotion to move the price.
- Promotion is often paid for, and paid promotion must be disclosed.
- The disclosure is usually present and in small print at the bottom.
- Volume and price move together on no company news.
- Being late is the design; the promotion exists to create the exit.
MAD Academy Training Video · 0:46
Somebody Needs You to Buy
A pump-and-dump manufactures demand in a thin security so an existing holder can sell into it, and the promotion is the product.
This lesson is part of a Stock Alerts + Tools plan.
Why thin securities
The mechanism requires that a modest amount of buying moves the price substantially, which is only true where the float is small and the ordinary volume is low. That is why these schemes concentrate in securities with a few million shares available and almost no ordinary trading.
The same property makes the position difficult to exit for anyone who buys during the promotion. Depth that is absent on the way up is absent on the way down, and the exits are attempted at the same moment by everyone.
A liquidity floor, applied before any promotional material is ever seen, removes essentially the entire category. It is the same constraint that belongs on any scan and it does this work as a side effect.
Scroll the chart sideways to see all of it.
What is observable
| Feature | Where to check |
|---|---|
| A very small float | The filings, if the company files at all |
| No revenue or minimal operations | The filings, or their absence |
| A recent change of business or name | The filing history, where one exists |
| Large share issuance to insiders at a nominal price | The registration statements and ownership filings |
| A sudden increase in volume with no filing | The chart against the filing record |
| A promotional disclosure of compensation | The bottom of the promotional material itself |
The last row is worth emphasising. Paid promotion of a security must disclose the compensation received, and that disclosure is generally present, in small print, at the end of the material. It states plainly that the promoter was paid, by whom, and how much.
The regulatory position
- Promoting a security for compensation without disclosing that compensation is a violation of the securities laws.
- Trading in a security while promoting it, without disclosure, is a further violation.
- Trading suspensions are used where a market is being affected by inadequate or inaccurate public information.
- Enforcement actions in this area are published, and the pattern of facts in them is consistent across decades.
A trading suspension halts a security for a period and it does not restore value. Securities frequently reopen far below where they were suspended, and the suspension itself is a public event worth checking for on anything unfamiliar.
The general principle underneath
The underlying point generalises well beyond this specific scheme: an opportunity that arrives unsolicited, in a security that almost nobody trades, with urgency attached, is a combination whose components each independently warrant caution.
It is also worth being explicit that nothing in this library is a recommendation to buy or sell any security. Everything here is educational analysis, and any material anywhere that reads as a directive to act on a specific security at a specific moment deserves the question of who benefits from the action.
The variants that appear now
The structure is old and the delivery changes. Several current forms share the same mechanism with a different route to the audience.
| Form | The mechanism |
|---|---|
| Group chats and channels | Coordinated promotion to a large audience at a scheduled time |
| Social media promotion | Paid or undisclosed promotion presented as personal enthusiasm |
| A relationship built first | The security is introduced after weeks of unrelated contact |
| A newly repurposed shell | A dormant company renamed and given a story |
The second row is where the disclosure rules bite. Promotion for compensation must disclose it, and the disclosure is frequently present in small print that the format is designed to make easy to scroll past.
The structural check remains the same across every variant and requires no judgement about the promotion: a liquidity floor, applied before anything is read, removes nearly all of the securities these schemes require.