If you believe you’ve lost money to a pump and dump scheme, you could be entitled to compensation for your losses. That said, identifying a pump and dump scheme can be difficult. Familiarizing yourself with theoretical and real-world examples of pump and dump schemes can help you figure out if you’ve fallen victim to one.
An experienced pump and dump lawyer can also review your situation and determine if you’re a victim of investment fraud. An attorney can also represent you and help you get your money back. Let’s take a closer look at some examples of pump and dump schemes.
Example of a Pump and Dump Scheme
Considering a made-up example of a pump and dump scheme can help you understand this type of investment fraud. For the sake of this example, let’s say that Mark and Jenna are stock market investors. Mark purchases 500 shares of stock from a little-known company at $4 each, totaling a $2,000 investment.
Mark then starts circulating fake news on online forums, claiming he has insider knowledge that the company is about to announce a groundbreaking product that will bring in a lot of revenue. Within days, the stock price skyrockets to $20, catching Jenna’s attention. Seeing the surge, Jenna purchases 200 shares at the inflated price, investing $4,000.
As excitement builds, the stock price peaks at $35 per share. Mark, eager to cash in, sells all his shares for a profit of $15,500. Meanwhile, Jenna holds onto her shares, convinced of the company’s potential.
Once the hype dies down and the company reveals it has no such product, the stock plummets to $3. While Mark enjoys his profits, Jenna faces significant losses and is stuck with worthless shares.
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Real-World Example of a Pump and Dump Scheme
In addition to considering made-up examples of pump and dump schemes, it can also be helpful to learn about pump and dump schemes that occurred in the real world. One example of this type of investment fraud occurred in the 1990s at Stratton Oakmont, a penny-stock brokerage.
Jordan Belfort, the firm’s co-founder, engineered a well-known example of a pump and dump scheme. Bellfort and his associates created an artificial demand for penny stocks by using aggressive sales tactics and misleading information.
By inflating the stock prices, sometimes from just a few cents to several dollars, Belfort and his firm were able to sell their shares at a profit, defrauding countless investors in the process.
Jonathan Lebed’s Pump and Dump Scheme
Another real-world example of a pump and dump scheme was orchestrated by Jonathan Lebed, a teenage stock trader who grew up during the dot-com bubble. Lebed promoted obscure, low-priced stocks on online forums.
He bought shares of these companies and created a buzz by posting misleading information about them online. As the hype grew and more investors bought into the stocks he posted about, the stock prices surged, allowing Lebed to sell his shares at a profit. Once Lebed sold his shares, the stocks plummeted, leaving other investors with substantial losses.
Lebed was eventually fined for his pump and dump scheme, which provided defrauded investors with a settlement. If you’ve suffered financial losses due to a pump and dump scheme similar to Lebed’s or Stratton Oakmont’s, you could be eligible to receive a settlement, too.
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Pursuing Compensation for Losses Caused by a Pump and Dump Scheme
Now that you’re familiar with several examples of pump and dump schemes, it’s time to take legal action against the brokerage firm or financial advisor who defrauded you. A skilled investment fraud lawyer can represent you during this process and pursue maximum compensation for your losses.
Here’s what a skilled attorney can do to help you get the most out of your claim:
- Offer you a free consultation
- Investigate your investment losses
- Gather evidence and use it to file a strong claim
- Determine which forms of compensation you’re entitled to receive
- Represent you during the Financial Industry Regulatory Authority (FINRA) arbitration process
- Fight for a resolution that covers your losses
- Answer any questions you have throughout the claims process
Losing money to a pump and dump scheme can be incredibly frustrating and may have a significant impact on your finances. The good news is that a trusted attorney can represent your best interest and work tirelessly to get the damages you deserve.
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Meet With an Experienced Pump and Dump Lawyer for Free
At Meyer Wilson, we understand how difficult it can be to move forward after losing your hard-earned money to investment fraud. That’s why our firm is here to pursue the settlement you need to replace your losses and move forward with future investments.
Contact us today to schedule a free consultation with an experienced pump and dump lawyer from our firm. We have over 75 years of combined experience handling cases like yours, so you can rest assured that we have what it takes to win your case.
Contact us today to schedule a free consultation and learn more about common examples of pump and dump schemes.
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