Recently, the Securities Exchange Board of India’s (Sebi) slapped a fine of Rs 7.75 crore on 11 individuals for allegedly operating a ‘pump and dump’ scheme in a scrip.
- The pump and dump scheme was operated through recommendations shared through Telegram channels, resulting in public shareholders purchasing the stock at an inflated price.
- In the stock market, a pump and dump scheme is a type of manipulation activity that involves artificially inflating the price of a stock through false and misleading information, only to sell the stock at the inflated price and leave investors with significant losses.
- This manipulative tactic is particularly prevalent in the micro-cap and small-cap sectors, where companies often have limited public information and trading volumes are lower.
