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 Utah, pump and dump schemes are considered a form of securities fraud and are illegal under both state and federal law. The Utah Uniform Securities Act (Utah Code Ann. §§ 61-1-1 et seq.) prohibits fraudulent and deceptive practices in connection with the offer, sale, or purchase of securities. This includes making false or misleading statements about a company to artificially inflate stock prices. Additionally, federal laws enforced by the Securities and Exchange Commission (SEC), such as the Securities Act of 1933 and the Securities Exchange Act of 1934, also prohibit these activities. Violations can lead to both civil and criminal penalties, including fines and imprisonment. Investors who believe they have been victims of a pump and dump scheme can report the activity to the Utah Division of Securities or the SEC. An attorney specializing in securities law can provide guidance on the matter and assist in any legal actions that may be taken to recover losses.