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 Georgia, pump and dump schemes are considered a form of securities fraud and are illegal under both state and federal law. The Georgia Securities Act of 1973, as well as federal legislation such as the Securities Exchange Act of 1934, prohibit manipulative and deceptive practices in connection with the purchase or sale of securities. This includes making false or misleading statements about a company to artificially inflate stock prices (the 'pump') and then selling off the stock at the inflated price for a profit (the 'dump'), which typically results in financial loss for other investors. Violations of these laws can result in both civil and criminal penalties, including fines and imprisonment. The enforcement of these regulations is carried out by state authorities such as the Georgia Securities Division, as well as federal agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Investors who believe they have been victims of a pump and dump scheme can report the activity to these agencies.