Scams » Scam And Its Types »Market Manipulation Scams

Market Manipulation Scams


Long-term incorporation of global financial market otherwise known as capital market has created extraordinary opportunities for U.S. businesses to access capital and investors to expand their portfolios. With people choosing to invest in the U.S. securities and commodities markets, scammers having left no stone unturned, their tampering is witnessed in the capital markets as well. The happening of these scams is mainly because of the growth level. The conception of intricate investment vehicles and the incredible boost in the amount of money being invested have created better occasions for individuals and businesses to carry out counterfeit investment schemes.

Market manipulation scams involve deceptive practices that artificially influence financial instruments' prices. Common schemes include pump and dump, where fraudsters inflate prices with false information, then sell for profit. Churning exploits excessive trading for commission, while spoofing creates false market signals. Wash trading deceives with simultaneous buy and sell orders, and front running uses non-public information for personal gain. Insider trading relies on confidential information, and penny stock fraud manipulates low-priced stocks. These schemes undermine market integrity and are illegal. Investors should stay vigilant, report suspicious activities, and be cautious to maintain a fair financial environment.

Market Manipulation scams

There is nothing devastating than getting scammed in the stock or commodities market; officially coined as Market manipulation, this piece of writing will help you know the current concepts and how to handle them with care.
Market manipulation takes a variety of forms, listed below are some of the famous types that you need to stay away from:
  • Churning- when a speculator puts both buying and selling orders at the same price, with an intention to grab the attention of other investors, this is said to increase the price.
  • Runs, ramping or painting the tape- called by any of these terms, this is when a group of speculators creates bustle or tales to inflate the price of a stock.
  • Wash trade not to be puzzled with wash sale, this is yet another form of market manipulation in which an investor buys and sells the same financial products.
  • Bear raid (a stock market strategy) - A trader or group of traders tries to force down the price of a stock to cover a short position.

"Spoofing and layering" is a technique in which large, fake orders are placed to create a false impression of market demand or supply, influencing the price of a security. "Wash trading" occurs when a fraudster simultaneously buys and sells the same security to create the illusion of trading activity. Illegal insider trading, though not always considered a scam, involves trading securities based on non-public, material information.

Red flags

  • Remarkable differences in bidding behavior
  • Acts conflicting with compliance manual
  • Nonrecurring transactions
If you want to build a winning portfolio, watch out for these red flags. Show caution at all times and be on your guard about examining anything in a company's income statement that raises a red flag. This isn't a surprise; vulnerable to manipulation, both revenues and expenses should be detailed in addition. Corporation management regularly has an inducement to employ in manipulation and auditors do not always catch on. Expert's advice to reading the income statement and management's discussion of its company in order to have a clear idea, also it provides clues for vigilant investors. This is all inclusive of the balance sheet and footnotes, as well as the cash flow statement.
Economic consultants can help respond to regulatory investigations, however, it is always good to do your own research and keep track of the happenings in the capital market.

How to outsmart?

Show caution every step of the way and
  • Always be skeptical
  • Be dubious about any hype created
  • Irrespective of how trusted things are, always independently verify claims
  • Find out where the stock trades
  • Research the opportunity
  • Beware of forceful pitches
Tips to avoid market manipulation scam

Tips to avoid market manipulation scam

Market manipulation

Independent manipulation


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