Market Manipulation
Intentional distortion of a security's price or volume through deceptive practices such as spoofing or pump-and-dump schemes.
What is Market Manipulation?
Market manipulation is the intentional distortion of a security's price or trading volume through deceptive, fraudulent, or artificial means. Common forms include wash trading (simultaneous buy and sell to inflate volume), spoofing (placing and canceling orders to mislead other traders), pump-and-dump schemes (inflating prices with false information then selling), and painting the tape (executing fake trades to create an illusion of activity). It is illegal under the Securities Exchange Act.
Example
In a pump-and-dump scheme, promoters accumulate shares of a microcap stock, then blast false earnings claims to retail investors via social media. After the price triples, they sell their entire position, leaving retail investors holding shares that collapse to near zero when the scheme unravels.