How Can Potential Investors Prevent Pump-and-Dump Scheme? 

An ordinary “pump and dump” scheme is when a con artist gives you what seems to be a fantastic deal on a stock, referred to as a lifetime investment. But, unfortunately, the stock’s price has increased due to an artificial market, and its worth will drop drastically when you purchase it. And that could lead you to lose your investment. 

The “brokerage firm” at the start of the con

The fraudster will sell all their stock at a high price before the value falls substantially once enough investors have overpaid for the stock. Investors are left with stock worth significantly less than what they purchased for it once the fraudster vanishes. When investors try to sell the shares, there are frequently few, if any, purchasers.

These scams are usually executed through social media, promotional ads on internet chat rooms, or sometimes on bulletin boards.

Learn to be cautious of the information you get, especially if it is an unsolicited phone call or on some online site. Sources of data can be inaccurate, misleading, or even fraudulent. 

This article will lead you on how to prevent yourself from this scheme. Here are five ways on how to protect yourself from a pump-and-dump scam:

  1. Investigate before investing

Making sure that anyone selling you financial advice or investments is registered to do so is among the greatest strategies to prevent investment fraud. Generally, anybody giving investment advice or selling securities must be registered with their local securities authority.

  1. Take a second look

Be wary of unsolicited investment possibilities that you could get from friends, on the internet, or over the phone. Contact the Ontario Securities Commission before investing.

Or get a second opinion from a registered advisor you’ve confirmed. You may also speak with an accountant or a lawyer.

  1. Spend the time you require.

Be wary of time-sensitive offers and pushy salespeople. Feel free to make an immediate investing purchase. But, spend the time necessary to make a wise choice.

  1. Gather information about the investment.

Recognize the risks and expenses involved with every investment before you make one. Ask inquiries and confirm that it aligns with your financial objectives without hesitation. Find out where to go for corporate information.

  1. Inform about an investment scam

Often, victims of investment fraud refrain from reporting it out of shame. However, not reporting what happened can leave others vulnerable to the same scam.


Be always cautious about where you get your information, particularly if it comes from an unauthorized caller or an internet source. Identifying someone’s true identity might be challenging since, for instance, many bulletin boards permit the use of aliases. And by sending many messages under several screen identities, one person might give the impression that there is a lot of interest in a little, thinly traded stock. It is also feasible for someone to publish favorable or unfavorable information about a particular stock to influence the price unfairly. 

Preferably, one must follow the ways and tips that are previously mentioned in this article to avoid these unnecessary and unsolicited scams to save you and your money. Lastly, Refrain from relying on your decision to invest in something simply on what you read online or over the phone.