.png){kind=logo}
The rise of online investing has completely changed the stock market scenario, but it's also given birth to a growing menace: market manipulation. Sophisticated pump-and-dump schemes are increasingly prevalent, snaring unsuspecting victims daily.
While cryptocurrencies, meme stocks, and decentralized finance continue to gain traction, it's crucial for investors to recognize the warning signs of these scams before it's too late.
Pump-and-dump scams are nothing new. They have been around in the financial space for decades and have usually involved penny stocks and low-cap shares. But now, in the past few years, these kinds of scams have assumed new colors, with social media sites and digital currencies as favorite targets.
Essentially, a pump-and-dump scheme means artificially pumping up the price of an asset, usually through cooperative marketing or deception, and then "dumping" the asset for a profit. The result is a sudden price plummet, with the late investors holding the bag. Although regulators are clamping down, fraudsters have learned to keep pace with the changing market environment. This makes it even harder for the typical investor to catch such fraud quickly.
Sudden price and volume spikes: Sudden price or volume spurts, especially without any related news or business update, are a sure sign to watch out for. If an asset is suddenly on the rise in price over a brief time, then something’s amiss. These spikes tend to occur in a vacuum—no big news about the underlying asset or project.
Hostile social media campaigns: Social media was the weapon of choice for manipulating markets in 2025. X (the former Twitter), Telegram, and Reddit were infested with cross-posts for non-mainstream assets, accompanied by desperate entreaties to "buy now while it’s not too late." Bots, or hijacked accounts for the sake of convenience, created an aura of credibility. There was a prominent one where hacking an authorized journalist’s account on X led to a phishing campaign touting a scam crypto, leading to massive losses by investors.
Pressure to invest quickly: Another usual ploy for pump-and-dump scams is creating a false urgency. The scammer tends to hurry investors into a decision, suggesting that the investment opportunity will eventually disappear or that they have access to "inside information." Rushing to invest keeps would-be victims from performing adequate due diligence, which is one of the fraudster's objectives.
Low-liquidity targets: Pump-and-dump schemes work best when low-liquidity assets, such as penny stocks or new cryptocurrencies, are targeted. These assets are less difficult to manipulate since even a small amount of capital can significantly pump up their prices. When the price is at its highest, the manipulators dispose of their assets, and the investors are left holding worthless ones.
Unsolicited investment advice: It’s important to be cautious about unsolicited investment advice, particularly when it comes from strangers or new friends on social media. Scammers often try to create a sense of community or agreement to lure you in. These unsolicited tips can quickly turn into high-pressure sales tactics, pushing potential investors to act fast before the ‘opportunity’ slips away.
The ramifications of a pump-and-dump scheme go far beyond mere financial loss. These scams undermine trust among investors, distort markets, and create resentment among legitimate traders. In 2025, as more investors move toward digital assets, these scams can potentially dissuade new investors from entering the market altogether.
Regulators have had difficulty dealing with the proliferation of such schemes. The anonymous and decentralized nature of most digital assets makes it difficult to identify culprits, and by the time the authorities can act, the damage is already done.
Do Your Research (DYOR): Even if you are planning to invest just a tiny amount into an asset, still be sure to do thorough research on the asset. Look for news from credible sources, check the project’s website, and verify the legitimacy. If you rely on hype and comments on social media without verifying any of the facts, you are asking for trouble.
Be skeptical of things that seem too good to be true: If an investment opportunity comes along that states the potential for a return that is unusually high and has little or no risk, that’s a red flag for sure. In the world of finance, there is little room for sureness, and any individual claiming the contrary is most likely hiding something.
Invest in established platforms: Investing through well-known and regulated platforms will provide you with some level of comfort because these exchanges are expected to have safeguards against workplace abuse in terms of manipulating the market and protecting you as a trader.
Don’t fall into the FOMO trap: FOMO is one of the most effective tools for scammers to use. Should you feel the pressure to invest, take some time to think about it. You may lose everything as a result of making an investment decision based on a fleeting moment.
Pump-and-dump scams are now both a danger and an increasing reality of investing. The advent of digital currencies, meme stocks, and decentralized finance has created the ideal backdrop to exploit the ignorance of retail investors. Nonetheless, with attention and understanding, these scams can be avoided.
Being aware of the signs of pump-and-dump scams, conducting thorough research on investments, and maintaining a healthy skepticism towards offers that seem too good to be true can help consumers avoid the consequences of market manipulation. As the financial landscape evolves, staying informed and vigilant is the best way to protect against the growing threat of market manipulation.
