PUMP AND DUMP

The expression "pump and dump" refers to a stock market scam, designed to catch greedy investors who are foolish enough to believe that unsolicited e-mails from complete strangers in another country contain genuine stock tips.

The idea is that the recipients will buy a stock based on messages which pump its virtues. The price will then surge, at which stage the promoters of the ruse dump their own holdings in the company concerned. After that the price collapses.

The warning signs are clear enough - it should be obvious that if the originators of the e-mails concerned really had special insights then they would have been much better off exploiting these themselves in total secrecy than offering them free of charge to all and sundry.

Over about three days recently Nick Renton received about 30 spam e-mails, all highly recommending a particular US share selling at 8 cents, on the basis that it would shortly reach 25 cents. Instead, it fell very quickly to less than 0.5 cents.

It is not clear why the fraudsters thought that somehow that number of similar messages would be more effective than just one or two.