If you invest in the stock market, a tip about a stock that’s “about to take off” can sound enticing, even when it comes from a stranger in a text, email, or social media ad. Be cautious as it may be the start of a pump-and-dump scheme, where scammers hype up a low-priced stock they already own, then sell their shares once the price rises and leave everyone else with the losses. Here's what you need to know.

How the Scam Works

Pump-and-dump schemes follow a pattern that regulators like FINRA have warned about for years:

  • The setup: Scammers may quietly buy up large amounts of a low-priced stock, usually a small company with very little public information available about it.
  • The pump: They may promote that stock through texts, emails, social media, and online ads, spreading false or misleading claims about "imminent" good news or "inside" information. The more people they get to buy in, the more the price rises.
  • The dump: Once the price is up, the scammers sell their shares quickly, sometimes in a matter of seconds. The price crashes, and everyone else is left holding shares worth far less than they paid.

You don't have to be a frequent investor or especially online to be targeted. These schemes often begin with unsolicited texts and social media ads promoting "investment clubs." From there, you may be asked to join a group chat, sometimes on a messaging app you've never used before. Once you're in, the scammers may recommend a few legitimate investments first to earn your trust, then steer everyone toward the stock they're pumping. They may also ask you to send screenshots of your account as "proof" of your trades.

Red Flags to Watch For

  • A text, email, or social media ad with a stock tip you didn't ask for
  • An invitation to join an "investment club" or to download an app so you can join a group chat
  • Investment advice from someone you've never met in person
  • Claims of "inside" information or big news that's about to break
  • Pressure to buy quickly before you "miss out"
  • Promises of guaranteed, risk-free, or extremely high returns
  • A video of a celebrity or TV personality promoting a small, unknown stock
  • Suggestions to borrow money to invest, such as taking out a home equity line of credit
  • Requests for your personal information, account details, or screenshots of your account

How to Protect Yourself

  • Treat any unsolicited stock tip as a red flag, no matter how knowledgeable the sender seems.
  • Don't click links, reply to, or download apps from unsolicited investment messages.
  • Check whether the person promoting an investment is registered using FINRA's BrokerCheck tool, and verify their identity independently.
  • Research the company using reliable, independent sources, not the message you received or social media posts.
  • Look at the stock's price history over months and years.
  • Never share personal information, account details, or account screenshots with anyone who contacts you about an investment.
  • Whenever someone pressures you to act immediately, it's worth taking time to slow down and verify the information first before acting.

This scam works because it doesn't feel like a scam. Nobody is asking you to wire money to a stranger. Instead, it feels like being let in on good news by people who seem to know what they're doing. It also plays into the sense of FOMO, or “fear of missing out,” which can be a powerful motivator for investors.

If You Think You've Been Targeted

  • Stop responding immediately to the people promoting the stock, and leave any group you were added to.
  • Submit a tip to FINRA.
  • Report cyber-enabled scams to the FBI's Internet Crime Complaint Center (IC3).
  • Be cautious of anyone who contacts you later offering to help you get your money back. Recovery scams often target people who have already lost money to fraud.

Learn more about recovery scams

A tip that seems too good to pass up is usually the one most worth a second look. Carefull keeps an eye on your accounts and alerts you to large or unusual transfers, so there's a chance to pause before a bad stock tip turns into a real loss.