Beware of pump and dump investment schemes

Late 2025 saw a concerning surge in “pump and dump” schemes targeting Australian investors, with ASIC reporting a notable rise in complaints to the regulator. If you've been active in the markets recently, particularly with small-cap stocks, you need to be aware of these increasingly clever scams that could cost you thousands.

What are pump and dump schemes?

Pump and dump operators are unscrupulous actors who artificially inflate share prices through false rumours and misleading information, then sell their own holdings at the peak, leaving unsuspecting investors with worthless shares. These schemes specifically target small-cap securities with low liquidity because even minor announcements can dramatically impact their share prices.

The recent surge

ASIC has reported a notable rise in pump and dump activities targeting Australian investors. International regulators, including New Zealand's Financial Markets Authority and the United States' Financial Industry Regulatory Authority, have also issued warnings about similar schemes in their jurisdictions.

The sophistication of these operations has reached alarming levels. Criminal gangs are now:

• hacking brokerage accounts to conduct unauthorised trades;

• exploiting different regulatory regimes in cross-border transactions;

• using fraudulent celebrity endorsements to build credibility;

• directing victims to private messaging apps like WhatsApp; and

• targeting investors through sophisticated social media advertising.

How these scams work

The process typically follows a predictable pattern. Scammers identify thinly traded stocks, then flood social media platforms, online forums and messaging apps with false information designed to create excitement and urgency around the investment. They might use fake celebrity endorsements, paid advertisements that appear high in search results, or coordinate multiple "finfluencer" endorsements to create the illusion of genuine market buzz.

Once momentum builds and the share price rises, legitimate traders who watch for small-cap opportunities often join in, further inflating the price. At the peak, the original scammers sell their holdings and disappear, leaving everyone else with rapidly declining shares.

The financial impact

The consequences are severe. ASIC research from 2022 estimated that retail investors were losing $6.3 million per month from potentially pumped events. The FBI has reported a 300% increase in victim complaints about these scams over the past year, affecting both stocks and cryptocurrency assets.

Warning signs to watch for

Several red flags should immediately raise your suspicions:

• unsolicited marketing creating urgency around specific investments;

• sudden rushes of commentary about little-known investments across multiple forums;
• social media advertisements directing you to private chat groups;
• fake celebrity endorsements or testimonials;
• strange market behaviour, such as sudden price spikes in typically stable investments; and
• claims of "inside information" or "guaranteed returns".

Protecting yourself

Before making any investment decision, especially in small-cap stocks, take time to verify the information independently. Check the company's official announcements, research its financial position and be particularly wary of investments promoted through social media or unsolicited communications.

If you suspect you've encountered a pump and dump scheme, report it immediately to Scamwatch, the ATO or ReportCyber. Quick reporting can help protect other investors and assist authorities in their investigations.

Given the recent surge in these sophisticated schemes, now is the perfect time to review your investment approach and ensure you have proper safeguards in place.

Source: ASIC Media Release - Pump and dump scammers put regulators on high alert