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

Kivver

Give yourself a pat on the back because you are spot on, unless a new thread
is really needed when the original poster who started it has long gone and new
info or charts is needed to be added then it isthe basis of a pump and dump.

I'll give you a brilliant example on advfn, Tou, Touch group, 3 or 4 rampers on
the old thread, no need for a new one then one poster "thinkbig" starts a new
thread and it's all ramp, thing is it sent a clear message out to the readers that
its a pump and dump, they killed the trade, on Friday it was ticking along nicely,
then these rampers appeared and today nobody will touch it with a bargepole.

kivver, ravey,

Yes I agree, if the original thread starter is still around, the appearance of an alternative thread is often the first sign of a ramp.

AAIR looks to be being ramped at ADVFN today, nice 20% spread too!

cheers ravy, i agree, it puts me off instantly. Its a bit of dilemma with trafficmaster (tfc) because it has been a bit of a dog of late, but seems to be making a bit of a comeback (although a long time after kat started promoting it) and there does seem to be good evidence to suggest that. But the posters on that thread and the NEW one over do it, over hype it and it puts me off it. Do they know something we dont???

congrats on your 3 grand by the way.

Haas anyone any thoughts on the new EME thread? I don't know the poster but the style is a little worrying. I'm not throwing any accusations here but the commentary on the buys and sells is a little familiar.
Alan

Indeed EME and the other oil one that sounds similar. The problem with shares like chaco, meridian, etc is that they are fertile ground for pump and dumpers. I seem to remember sanctuary went up partly because there was apparently a tip doing the rounds from some penny tips sheet that it was worth 5p. A broker's note that Chaco's worth 2. HMM I wonder.

St. Mowden and the others you mention are good shares but maybe a little too boring. I like the FTSE 250 mid caps because they have the best of both worlds. eg. ADN, TLW, BUR AQP's doing well at the moment. Papal power's done some good work on Leadcom on the bulletin boards, it looks good.

classic pump and dump was GW Pharmaceuticals a few days ago...blatantly ramped up by the press[backhanders?] then the boys in the know dumped the afternoon before the next mornings RNS...classic pump and dump job verging on criminal

Its not always easy to tell the pumpers from the merely over-excited. There's been a lot of this on Desire Petroleum, thankfully not on this board very much. One guy over on another board has a shedload - far more than is good for him and then proceeds to get almost tearful when queries about his pie in the sky forecasts are made. I think that could be less of a pump and dump and more someone very in love with "his" company- and love can be unrequited!
Would it be reasonable to say that most people posting on a BB have got the shares and only want to hear good news so inevitably we have a vested interest in seeing a ramp?

maestro.

You have some nerve coming onto this thread and critising the press for
Gwp, everytime i looked in on the Gwp thread you were ramping the hell
out of it, in fact whenever i can i recommend readers filter you on advfn
as you are one very dodgy and misleading poster who cannot tell the truth
if your life depended on it.

You must have been banned on advfn because i have not seen your name
crop up of late but i bet you are back with a new handle, you are quite
dangerous on a financial bb to any new investor because you bullshit and
bullshit a lot...and that's not imho...that the truth

If any investor is stupid enough to buy desire petroleum I despair. It is the most (pardon the pun) undesirable share going. It cannot get an oil rig for two years. This is the problem with a lot of these speculative explorers who lay claim to some acreage. How quickly can they get pumping and then translate it to the bottom line. Why not wait until they're actually making profits. I think Benjamin Graham says that he never based his investment decisions on prospective PEs because 51% of companies do not meet their forecasts. Therefore he always bought on historic PEs. Prospective PEs are by no means a sure thing. They're just hope.
The difficulty is that with the recent boom in commodities some institutuions for example RAB capital seem happy paying lots for stakes in White Nile etc because they're so scared about future oil prices.

I found this posted on the superscape board from a poster called Dalios. I thought it was hilarious.

H
You need to get a grip of how the markets work!
Did you realise that in the morning, the market makers read through the advfn fbb to decide how the sp should be set.
They know the posters all have city contacts.
When they see something as popular as SPS they instantly become short of stock and start shaking the tree as they need your shares.
This sometimes goes on for years and you will see the sp slide but you are safe to keep buying, or averaging down in the knowlegde that the shake is a great time to top upon on the cheap.
Wise up young(ish!) lady, im learning all the time, for instance, i've just found out that when directors are dumping their holdings, its because they know the shareprice is going to fly to the moon, and are selling so as to avoid being accused of insider dealing.
d.

Saintserf :-)

I think it may be a wise moment to get this thread started again having seen the resurgence of interest in the DMR thread.

Ian

Someones started two new threads for SER, by a new name of The Evil one.

Just out of interest does anyone think that Leadcom's being pumped?

Generally only one person posting (with good intentions I think), i certainly wont go near it until i see the price going up.

Aldwickk - an interesting observation.

In the hilarious novel "The House of God" by Samuel Shem, the Fat Man illustrates how the junior doctors arrive at outlandish, incorrect diagnoses by saying that if one of them heard hoofbeats outside, he'd automatically assume it was a zebra.

The SER thing is also a "zebra". Brokers publish reports and recommendations every day of the week. End of story.

PUMP =- but by Whom?
Let's remember prior to 2000, when any ol' rubbish could be placed and make a profit....wasn't that "pumping?" - to sell something for ten-times its notional value?. (Of course when a Co is launched there is a risk the price is "too high" because the promoters are getting excited by their own words.).......but very soon the Market will question: What turnover, What Profits and importantly what repeat Orders?
...and what cash at bank until the business has been trading 5 years, or more...
/
Until a company can change one of these four quarters (via RNS) and the Market can confirm truth, then everything else...is pumping...so by that definition, I Pump - Oh No!
Lets's have a moritorium on phrases like
"This one is set to go" -
"The market for (something losely related) is worth $xxxbillions"
"Directors bought today..."

For these words mean nothing if the Dirs are playing golf every day...or visiting potential customers (esp with an RNS), which are never followed-up. Visiting prospective customers is easy - you are taking them to lunch, so why would they refuse?.....getting someone to committ to a new Business =- sh that's tricky - just as "No-one got fired for buying IBM".....your contact might, if he buys widgets from this Novelty Widgets a Go-Go company with a tiny turnover - can they deliver quality on time?
/
So we could construct a PUMP pattern - that of "kind words" and the resulting sp-rise against what the company is actually doing - via its RNS....and here I mean satisfying the above Four Quarters of Business - for without those improving the sp will slip back to the original "comfort zone" . Think of it as a beam-balance which is in balance by what outsiders say and what the company does. Ask yourselves: Are these facts in-balance? So often they are wildly out.
/
I don't own shares in the Novelty Widget a Go-Go Company; but I wish I did, as Directors have been buying and the Market is several $billion, growing 5% pa with little competition as they have a strong Patent.
Ah.

Spammers manipulate stock markets
Spam messages that tout stocks and shares can have real effects on the markets, a study suggests. People who respond to the "pump and dump" scam can lose 8% of their investment in two days. Conversely, the spammers who buy low-priced stock before sending the e-mails, typically see a return of between 4.9% and 6% when they sell.

http://news.bbc.co.uk/2/hi/technology/5284618.stm