What is a Pump and dump scheme?

The Securities and Exchange Board of India (SEBI) imposed a penalty on Bollywood actor Arshad Warsi, his wife Maria Goretti and 29 others for their YouTube-run pump and dump SCHEME.

  • Pump and dump is a manipulative scheme in which a person tries to increase the price of a share using fake information. The claims are false, misleading, exaggerated, and spread to make personal gains. This is often done by a person who has monetary influence over many people.
  • Under the pump-and-dump scheme, a person buys a significant holding in any stock. Next, he makes exaggerated claims about the company, encouraging people to “pump” their money into it and buy more.
  • As the stock price goes up, he “dumps” it and pockets the gains. However, as the significant stock volume is dumped, its price falls, and other investors lose money.

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