Pump and dump schemes have two parts. In the first, promoters try to boost the price of a stock with false or misleading statements about the company. Once the stock price has been pumped up, fraudsters move on to the second part, where they seek to profit by selling their own holdings of the stock, dumping shares into the market.

These schemes often occur on the internet where it is common to see messages urging readers to buy a stock quickly. Often, the promoters will claim to have inside information about a development that will be positive for the stock. After these fraudsters dump their shares and stop hyping the stock, the price typically falls, and investors lose their money.

In Florida, pump and dump schemes are considered a form of securities fraud and are illegal under both state and federal law. The Florida Securities and Investor Protection Act (Chapter 517, Florida Statutes) prohibits fraudulent practices in relation to the offering, sale, or purchase of securities, including making false statements or failing to disclose material information. At the federal level, the Securities Exchange Act of 1934, enforced by the Securities and Exchange Commission (SEC), also prohibits manipulative and deceptive practices, including pump and dump schemes. These schemes involve artificially inflating the price of a stock through false or misleading statements (the 'pump') and then selling off the stock at the inflated price (the 'dump'), resulting in losses for other investors when the price collapses. Perpetrators of pump and dump schemes in Florida may face both civil and criminal penalties, including fines, restitution, and imprisonment.