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 Indiana, as in other states, 'pump and dump' schemes are considered a form of securities fraud and are illegal under both federal and state law. The federal Securities and Exchange Commission (SEC) enforces laws against market manipulation, including pump and dump schemes, under the Securities Exchange Act of 1934. Perpetrators can face severe penalties, including fines and imprisonment. Additionally, Indiana's securities laws, governed by the Indiana Securities Division, also prohibit fraudulent practices in connection with the offer, sale, or purchase of securities. The Indiana Uniform Securities Act provides the regulatory framework for these matters and empowers the state to pursue enforcement actions against individuals and entities engaging in pump and dump schemes. Victims of such schemes may also have the right to bring a private legal action to recover their losses. It is advisable for anyone involved in the securities market to exercise due diligence and skepticism towards unsolicited investment advice or tips, especially those received via the internet.