Pump-and-Dump Scams Are Evolving. Here’s How to Protect Yourself.

In an era where ideas for under-the-radar stock picks can spread across social media in minutes, regulators are sounding the alarm that “hot tips” could in fact be carefully orchestrated scams.

Recently, the Canadian Securities Administrators (CSA) warned about a rise in “ramp-and-dump” scams, a more coordinated version of the typical pump-and-dump scheme that tend to target low-priced or low-trading-volume stocks.¹ Here, scammers use social media platforms to pose as experienced investors, promote specific stocks and pressure people to buy before prices rise. Once the stock rises, fraudsters sell their holdings and disappear, often leaving other investors with steep losses as shares collapse.

Data from the Canadian Anti-Fraud Centre shows Canadians lost more than $704 million to fraud in 2025,² about half of that to investment fraud.³ With reported losses topping $2.4 billion since 2022⁴ and the growing use of online investor groups, it’s helpful for self-directed investors to be able to better spot these scams.

How pump-and-dump and ramp-and-dump schemes work

Pump-and-dump schemes are a form of securities fraud in which scammers drive up a stock’s price by spreading misleading or exaggerated claims about the company (“pump”), then sell their own shares at the inflated price before the stock falls (“dump”). These schemes typically involve low-priced stocks or stocks with low trading volume, as they often have limited analyst coverage or public scrutiny. The fraudsters then promote the stock online to drive up demand and inflate the share price. Once the stock rallies, the organizers sell their holdings at a profit and leave other investors exposed when the price falls.

Ramp-and-dump schemes follow the same basic pattern but are often more coordinated. Canadian regulators say many now operate through social media platforms or group chats on WhatsApp, Discord and Telegram, where organizers pose as experienced traders or investment professionals, promote specific stocks and encourage members to buy quickly before shares move higher. The schemes often target penny stocks and lesser-known securities, and lower trading volume can lead to sharp price swings. And using group chats makes the discussions private and more difficult to trace.⁵

For self-directed investors, the risk is that these promotions can surface during routine online research or in legitimate-looking investing forums. By the time a “can’t-miss” stock tip begins circulating widely online, early promoters may already be preparing to exit their positions.

How to spot a ramp-and-dump scheme

Some red flags indicative of a ramp-and-dump scheme are claims of insider or expert information, promises of guaranteed returns and screenshots showing supposed trading profits. Some groups create a sense of urgency by encouraging people to buy stocks before shares “take off,” while others market themselves as exclusive investing communities offering privileged market knowledge and education.

The challenge is that oftentimes, these campaigns are designed to resemble legitimate analyst commentary.

How to protect yourself

It can be helpful to approach unsolicited stock tips and online investing groups with caution. Legitimate financial advisers don’t typically contact potential clients via social media or private messaging apps, and no stock investment has guaranteed returns.

Experts typically recommend independently researching a company – including its leadership team, financial performance and public filings – before investing. It can also be a good idea to take the time to verify claims using multiple credible sources rather than relying on social media hype.

The CSA’s National Registration Search allows investors to check whether an adviser or firm is registered in their province or territory. Investors can also search the Canadian Investment Regulatory Organization’s dealer directory and AdvisorReport database. While not every financial professional is required to appear in those registries, the absence of registration information could be a warning sign.

Stay skeptical

Online investing communities can be a useful source of market discussion, investment ideas and investor education. But regulators warn that these same platforms can be sources of stock manipulation schemes designed to exploit hype, urgency and fear of missing out. For self-directed investors, due diligence remains critical, especially when stock tips circulate through social media or private chat groups.

In fast-moving markets, it’s important to pause, research and think independently before you choose to invest.