What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing in the past, we've covered many cases of pump and dumps and market manipulation. They often involve sophisticated schemes with professional stock brokers and promoters. However, the vast majority of market manipulations happen on a much smaller scale. These cases are often difficult to prove in court, so most of the masterminds never face justice for their crimes.

These schemes happen every day on social media platforms, including youtube. Every year, individual investors lose tens or even hundreds of millions of dollars. Over the past few years, the stock market has been democratized significantly. Individual investors have never had as much information about stocks available to them as they do today.

A retail investor watching youtube and reading wall street bets today, arguably has better information than a professional stock broker 10 years ago, but this does not come without a cost. Whenever there is a new platform, unscrupulous actors will always find a way to abuse it and scam. Unsuspecting investors out their hard-earned money. If you follow any altcoin or penny stock channels, you can probably see that pump and dumps are a widespread phenomenon on that corner of youtube.

In this video we'll go over how these schemes work, how the promoters profit from them and, most importantly, how you can avoid being a victim of these scams. Pump dump is a form of securities fraud that involves buying a stock or cryptocurrency and then artificially inflating its price by disseminating false or misleading information. Once the price pumps, the promoters, sell their shares out of profit and leave the victims holding the bag, you might think that it takes huge amounts of money to move the price of a stock, so only promoters with a very large following can perform, pump and dumps, But you might be surprised at how little money it takes to pump up the price of a penny stock. There are about 8 000 stocks listed on the major u.s exchanges, of which the vast majority are all small caps.

There are 1 500 nano cap stocks which have a market cap of less than 50 million dollars each, for example, take cyprus, environmental, which has a 17 million dollar market cap. There's nothing particularly noteworthy about this stock and we found it by just randomly picking a nanocap stock with low volume. 17 million dollars seems like a lot of money, so you might think that you would need at least a few million dollars to move its price significantly. On a typical day, cyprus, environmental has trading volume of about fifty thousand shares, with its stock price of one dollar and thirty seven cents.

That means that about seventy thousand dollars worth of shares trade hands each day. This is just point four percent of the market cap. Let's say, hypothetically that a youtuber makes a video telling their audience cypress environmental is a great stock for whatever reason, maybe they make up some story about how the company is about to unveil some great new initiative, which will cause the price to skyrocket. You don't have to be that big of a youtuber to get ten thousand views on a single video.

If ten thousand people watch the video and ten percent of them decide to buy the stock. This means that there are one thousand new buyers. If each one buys five hundred dollars of stock, that's five hundred thousand dollars of buying pressure, which is equal to more than seven times the typical daily volume. You don't need a phd to know what would happen to the stock when people try to buy seven days worth of volume all at once after the price pumps, the mastermind behind the scheme dumps his shares at a huge profit and the selling pressure causes the stock To go back down to its original levels, there are two ways: a youtuber can profit from the scheme.

First, he can buy the stocks himself before the pump to profit directly. Alternatively, a third party can buy the stock and pay the youtuber to promote the stock. If the youtuber fails to disclose the payment is illegal, but it's often difficult for the sec to detect these small-scale market manipulations, so these crimes usually go unpunished. Sometimes the youtuber will disclose that they are being paid to promote the stock when people know that as a pump and dump, you might think that they wouldn't buy the stock.

But many viewers think that if they get in on the ground floor and sell quickly enough, they can also make a profit. Of course, this is a fallacy, no matter how quickly you think you can sell. You can never sell as quickly as the mastermind who orchestrated the pump and dump. They often have limit orders already in place, so they can start immediately selling after the pump starts.

Trying to play these pump and dumps as an outside investor is no different than going to a casino. It might work sometimes, but the odds are always rigged in the house's favor. In this case, the house is the organizer of the scheme. Remember the only way they make money is, if you lose money over the counter or otc stocks are even more susceptible to pump and dumps, as most of them are tiny and there are significantly less regulatory scrutiny.

There are almost 13 000 otc stocks, which is more than all the stocks traded on the major exchanges such as the nasdaq and the new york stock exchange. Many of the stocks on the otc markets have zero revenue or future prospects. Some of them don't even operate anymore, but their shares are still listed. For example, in the spring of 2021, a twitter user by the name of oc millionaire started pumping the price of accuracy resources after he bought 41 million shares.

Acres is a defunct company that no longer exists. Oc millionaire made more than 100 tweets, falsely claiming that actress was reviving its operations and investors could make huge profits. He dumped his stocks for an alleged profit of 929 thousand dollars, leaving his twitter followers to hold the bag. Needless to say, his victims lost everything.

Accuracy's stock price is now zero dollars and has a market cap of 661 dollars. This pump and dump was so obvious that the sec almost immediately found him out and charged him with securities fraud, but many less blatant schemes go undetected if you've ever watched the wolf of wall street, you might remember the scene where leonardo dicaprio sells a penny stock For a company that operates out of a garage, these types of schemes are much more prevalent today than they've ever been in the past, but instead of cold calling, they now use social media. There are lots of legitimate youtubers who can give you great insights about stocks and investing, but it's often hard to differentiate the scammers as a general rule of thumb. If someone is talking about a stock with a market cap in excess of one billion dollars, you usually don't need to worry.

If it's between 100 million and one billion dollars, it might be okay, but you need to do extensive due diligence on your own before even thinking about buying it. If it's below 100 million dollars there's a significant chance as a pump and dump if it's over the counter, it's not even worth your time to think about it. If you ever wondered why wall street bets bans mentions of sub 1 billion market cap stocks, it's to protect their members from pump and dumps all the potentials for pump and dumps with penny stocks also exist with crypto. The only difference is it's far worse as the price of bitcoin surged.

In recent years, thousands of developers wanted to get in on the action by launching their own altcoins. As of august 2021, there are almost 6 000 all coins in circulation. The vast majority of these coins have zero fundamental utility and should probably be worth nothing, but it's a gold mine for pump and dumpers. Most of these coins have minuscule market caps and you can pump the price, even if you just have a few hundred followers.

Also many crypto exchanges are not regulated, so it's relatively easy to evade detection by authorities. It's gotten so blatant that there are now discord, servers and telegram groups dedicated to crypto pump and dumps. They announce an altcoin. They are planning to pump and tell all the members to buy the coin.

This is called a transparent pump and dump, as they don't even try to hide what they're doing the members of the server know what's going on, but they still buy as they think they can get in and out fast enough to make a profit. It's a sad state of affairs, as the members are like crabs in a bucket each one trying to front run the others. Many of these pump and dump groups are run like pyramid schemes. If you recruit enough new members into the group, you can get tipped off as to which all coins they'll pump before the rest of the group.

They basically get people to bring their friends in to be scammed by the time. The coin is released to the general members. The admins already have their sell orders in place. This all happens in a matter of seconds, so the chances of making money as a general member is basically zero.

The fact that these pump and dumb groups can operate in such a blatant scam goes to show how desperately money hungry some altcoin traders are they're willing to suspend their disbelief and ultimately pay the price. Many of these groups are based in foreign countries, which lack competent financial regulators. This allows them to operate with impunity over very little risk of prosecution. Alright, guys that wraps it up for this video.

What do you think about social media pump and dumps? Let us know in the comments section below, if you enjoyed this content, make sure to hit the like button and subscribe. So you don't miss future uploads as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.