Can the elements of the pump and dump scheme be applied to short selling stock?
Similarly, in short-selling or scalping themes, a defrauder may use the opposite tactic to commence fraud. In short selling or “scalping” schemes, the defrauder puts out false information to devalue a particular company’s stock. The defrauder then purchases the stock once the stock falls in value, only to sell it off when the stock returns to its correct price absent the presence of fraudulent information. How do defrauders use a pyramid scheme to commence fraud? Another type of fraud is the Internet pyramid scheme. Internet pyramid schemes are presented to a potential investor as opportunities for making money. The investor is prompted to make an initial investment and is promised large profits for recruiting others to the scheme. Pyramid schemes can involve chain letters or actual products. Unlike the other schemes discussed above, profit is not made directly from sale of a product or a security, but rather from the signing up of others to join into the scheme. Eventually, the supply
