o How Pump & Dump Works o What to do if you think you may be a victim o Current Pump & Dump Suspects [DMR] o Previous Pump & Dump Suspects o Links to key posts in this thread o External Links

This thread is work in progress, is reserved for a discussion of the Pump & Dump process, and to flag up UK stocks that people feel may be currently subject to that process. The intention is to keep the 'meat' of the content in the header, which will be frequently and regularly updated from any posts made to the thread. I'll also use the main thread as a change control to record and audit updates to the header. If you have been the victim or perpetrator of a pump & dump, I would welcome your comments and stories (anonymously if preferred) as posts to the main thread. I will include extracts from them, and links to them in this header. If you prefer, you can click on my username and email me your stories through the MoneyAM internal mail system

How Pump & Dump Works

Pump and Dump schemes are a technique used by devious and immoral traders on thinly traded stocks to con unwitting and unsophisticated traders out of their savings and to make huge profits for themselves.

Candidate stocks are typically low liquidity penny shares with a history of low volume that suddenly hit the limelight when one or more energetic, enthusiastic and ebbulient posters 'discover' them and claim them as hidden gems. The usual scenario is that despite no change in the rate or quality of newsflow there is a rapid rise in volume, a disproportionate rise in price signifying accumulation and pump with little or no selling, an exhaustion peak and then a rapid return to previous levels or thereabouts, with our ebbulient posters moving on to pastures new. Price and volume usually then return to normality.

A pump and dump scheme usually has the perpetrator buying at low levels for some weeks prior to the pump stage, after which they promote the share, typically via BBs and/or mailing lists. They may buy a few during the pump and make sure everyone knows that they're buying, but they'll also sell a few more to take profits. It's the victims of the scheme who buy the shares the fraudster is selling.

When the fraudster thinks that she's unable to inflate the price any further, or has reached her profit targets, she'll start selling a lot harder. This is the 'Dump' stage of a pump and dump. She'll claim on the BBs that holders should 'keep the faith', she'll blame the shorters, she'll try to encourage people to top up and she'll promise lashings and lashings of jam tomorrow. She may buy a few and publicise the buys just to cover her tracks. But on the whole, she'll be selling.

At this point, the price may yoyo a little but the fraudster's selling is putting an overall downward pressure on the share price.

At some stage soon we get a 'race to the exit'. Some of the mugs who have been suckered in, start to realise what's happened and they too sell. The fraudster sees the sells, realises the game is up and dumps all of her remaining holdings.

The price drops, often by as much as 75% in a matter of days or hours. Those who are lucky enough to get out do so. The first ones to get out see a small profit or a small loss. Those who aren't so lucky typically leave the share certificate in a bottom drawer somewhere, determined to wait until they can get their money back before selling. Usually they never do. Some will wait forever, and have effectively lost their whole investment, others may sell a year or two later, perhaps at 1% of their purchase price.

What to do if you think you may be a victim

If you're reading this then you've already got over the first hurdle - denial. Most traders suckered into these schemes refuse to recognise that they're being conned despite warning signs that are so obvious in retrospect. A significant number remain in denial for many years after the price has collapsed and never get around to selling - a phenomenom psychiatrists call 'cognitive dissonance'.

If you've bought into a pump and dump and have recognised it for what it is, you're probably wondering what to do. Chances are, you're thinking "I can't sell yet cos its not quite covered my buy price .... just a few more fractions of a penny and I'm out".

So What do you do?

Firstly - you need to ensure that the money you have invested into the share is within your comfort zone. Ask yourself "Will I mind if I lose it all?" If the answer is "no, I'm happy to lose the lot", then play this however you see fit. Maybe you'll make some money, maybe you'll lose your entire investment.

If it's "I daren't lose it all, I wont be able to face my bank manager /partner /kids /parents /landlord/ gasman" (delete as appropriate) then you need to take a long hard look at the way you trade, and you *must* reduce the size of your holding to the level where you don't mind losing all of what's left - even if you have to take a small loss on the tranche that you sell. Bad tasting medicine, I know, but infinitely preferable to the alternative. Get yourself onto a risk management course. I would expect www.glomtc.com to run courses along these lines.

Although pump and dump schemes are illegal worldwide, succesful prosecutions are rare and almost non-existant in the UK. The highest publicity case in the USA related to a 14 year old boy who was eventually fined more than $250,000 having made much more than this through using internet BBs and spam mail to promote and then dump his penny stocks.

The highest profile UK case was probably the Daily Mirror City Slickers scandal that eventually came to court in November 2005. The court heard that Piers morgan bought 66,000 worth of Viglen shares the day before the Mirror tipped them. James Hipwell also bought 36,500 worth which he sold at 9.00am the next day for a profit of almost 20,000. Also tried was a BB Poster whose real name is Terry Shepherd - he was accused of forming part of the conspiracy.

Trade suspect shares if you must - but keep your wits about you.

Current Pump & Dump Suspects Dimension Resources - DMR

EPIC: DMRName:Dimension ResourcesCategory: Illiquid Penny ShareNMS: 3000Current Phase: PUMPAccumulation Started: Around July 2005Pump Started: Late October 2005Dump Started: Awaiting Data

Previous Pump & Dump Suspects

EPIC: CFPName:City Financial associatesCategory: Illiquid Penny ShareNMS: TinyAccumulation Started: est Jan 2004Pump Started: 31/03/2004Dump Started: 28/04/2004Maximum Loss To Victims: 81%

Links to posts within this thread Posts 2,3 and 4 on page 1 of this thread are typical indicators of the pump stage of a pump and dump scam. The scammer cross-posts buy recommendations for their stock on multiple threads, and points to their previous pump and dump scams as successes. Naturally, they only mention the low (where they bought) and the high (where they exited). The victims bought at those highs and will probably never see those prices again. Those victims have been well and truly conned out of their money, and many will never realise how and why they were deceived. External Links SEC Article Wikipedia 14 year old fraudster Investopedia link

No, no you misunderstand me Kivver. I mean good commodities companies with strong fundaments are good buys. Like RIO, BHP, cement, aggregates, platinum like Aquarius, lonmin, gold like peter hambro golden prospect, companies where the growth % per year is higher than the PE. I wouldn't buy any of these commodites without good pes, hence bowleven etc. Turnarounds are different, eg. Amstrad, marks and spencers, jessops, wolfson since last year, 100-400. They are not hype like the crap small commodites bubble at the moment they have to have good fundamentals because they've pissed off the market and require a big fundamental change to get back into the city's good books.

Fromy my observations and readings, Gausie has my vote. But we must all do our own thinking and decision making. IMHO, much cynicism and self-reliance are essential in our time, if only from past experiences.

Fred and I seem to agree rarely, but...........
The tech boom was built on giving massive values to companies that were no more than 6 desks, 4 PC's, 1 Geek and a bit of an idea that there may be millions in that idea. The real value of the company turned out to be about 30 at the local second hand office furniture store.
There were exceptions. Google is a prime example.
The mining and oil markets have some disturbing parallels. A hole in the ground is worth zip, until it produces profitably. There are one or two Googles and Friends Reunited out there, but, like tech stocks in the boom, every one can appear to be a humdinger but on average, they are overvalued as everyone looks for a more lucrative bet.
I wish everyone luck that they find "the one", but statistically I think there are more losses to be made than gains. I think someone mentioned a fools market on another thread and that may yet be applied to the burgeoning number of mining / oil stocks claiming a fantastic new prospect. While the bulls run, the ramps will work and many, not just the rampers, will make good money. I hope your timing is good because the majority will be just a hole in the ground surrounded by a lot of disappointed investors.
Alan

al - that was the point i was making, why the interest in stocks looking for commoditities whoes PE ratio are enormous or non existant but companies like xta, who have them, massive profits improving dividends trade on on a pe of 8.5. it dont make sence. suppose everybody thinks they have found the next Cairn energy???

Indeed, well look at Victoria Oil. What's its PE, how would you value that? I went on the meridian petroleum board and tried to ask a dispassionate question "What's the exact, precise nature of the news you're expecting?" and I got pilloried, because the last thing rampers want is someone proffering a dose of cold realism. They get accused of being sceptics, derampers??, and remember the maxim "the market makers want your shares" hmmm do they really. There is a thread on the moneyam board entitled "Fill your boots" AND ONE "Buy me I'm a bargain". I think they should be banned

I agree

I wondr who "Sue Helen" (smiler26) and Capetown (Dusseldorf) really are?

I wonder if they also post by more familiar names, on ADVFN at least?

.

ravey,

Any ideas?

Suehelen is a arrogant ramper who lives in York, lost his/her money
and now works full time.
I actually had/have time for Dusseldorf but now the pair of them are
trying a new tactic on advfn and a very common practice for a pump
and dumper which is to repeatedly post a totally ridiculous price target
of 6p, first it was 2p now it's 6p, what these 2 posters have combined to
do is show extreme arrogance, that's just ignore all the common sense posts
and post pure ramps because they hope to suck in people believing that if
they think it's worth 6p then surely it's worth buying at less than 10% of that
price, the pair are both desperate to get out of this stock, any significant rise
and they will start dumping, i mean if it gets to 0.5p bid or higher.

I could add so much to this debate and name hundreds of pump and
dump posters from advfn but is it worth the effort, before i changed my
nickname after giving up on advfn for a while i had 4000 nicknames
filtered on that site, it is dominated by nasty pieces of work who do not
care if they post lies all the time to try and con any reader.

How about ETQ...is it a pump and dump?

I think the Robot Stock thread is all part of a pumping tactic... on the 10 March recommended MRP and tommorow DMR!! Does any one know what i mean... very suspicious...

Also lots of buys on DMR on friday... no sells?
Date Time Price Quantity Type Bid Offer Total buy
10/03/06 16:08 0.45 50,000 0 0.35 0.5 Buy 800,000
10/03/06 14:37 0.45 150,000 O 0.35 0.45 Buy 750,000
10/03/06 14:36 0.45 150,000 O 0.35 0.45 Buy 600,000
10/03/06 12:39 0.5 200,000 O 0.35 0.45 Buy 450,000
10/03/06 10:26 0.41 250,000 O 0.35 0.45 Buy 250,000

This weeks pump and dumps so far from advfn conists of the usual
nicknames once again using the same pump and dump thread (ups)
to tip (once again) the same stocks.

There's a poster called gagner2006 who is a new name to me who is
rife at this game (already) and in particular a stock with the ticker Zrl, a stock
with 2 mm's operating almost a 30% spread when both have the same
price and is currently 15.25p mid price but "Unbelievable you can get this under 25p IMHO" according to him.

Every week the same rubbish, this poster is desperate to get out of this stock,
if it so good then why does he need to ramp it everywhere ?

Plenty of other dodgy posters ramping their stocks on that thread and actually
including a couple of stocks i hold, ever heard the expression "do the ramping for
me", i will use any strength in the shareprice to reduce my holdings because the
prices never stay up for long.

Looks like the main pump and dump is going to be IQE this week.

Master RSI has selected that stock as the UPS of the week, In daily Traders Thread- Monday 13 March...

Exactly :-))

Would you not trust him then... he seems to know a lot about charts

Here's a list of other stocks that are on the pump and dump menu
for this week from glancing over advfn tonight.

Zba, Fmj, Eic, Dmr, Epe.

Be careful, dont chase them higher, it's very easy to pick stocks that will
rise but remember those who are flogging them have already bought them
at cheaper prices and now want to sell.