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 Maine, as in other states, 'pump and dump' schemes are considered a form of securities fraud and are illegal under both state and federal law. The Maine Uniform Securities Act (Title 32, Chapter 135 of the Maine Revised Statutes) governs securities within the state and prohibits fraudulent and deceptive practices, including making false or misleading statements to manipulate stock prices. At the federal level, the Securities Exchange Act of 1934, enforced by the Securities and Exchange Commission (SEC), also prohibits pump and dump schemes. These schemes are a form of market manipulation that can lead to severe penalties, including fines and imprisonment for those convicted. The SEC actively monitors and investigates potential securities fraud, and individuals who believe they have been victims of a pump and dump scheme can report the activity to the SEC or the Maine Office of Securities.