What exactly is "pump and dump"? Isn't this the GS business model?

First 3 links from seach on google:

In wikipedia
"Pump and dump" is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" their overvalued shares, the price falls and investors lose their money. Stocks that are the subject of pump-and-dump schemes are sometimes called "chop stocks".

While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors.
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In investopedia
A scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements. The perpetrators of this scheme, who already have an established position in the company's stock, sell their positions after the hype has led to a higher share price. This practice is illegal based on securities law and can lead to heavy fines.

The victims of this scheme will often lose a considerable amount of their investment as the stock often falls back down after the process is complete.
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On SEC Web-site
"Pump and dump" schemes, also known as "hype and dump manipulation," involve the touting of a company's stock (typically microcap companies) through false and misleading statements to the marketplace. After pumping the stock, fraudsters make huge profits by selling their cheap stock into the market.

Pump and dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have "inside" information about an impending development or to use an "infallible" combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is "pumped" up by the buying frenzy they create. Once these fraudsters "dump" their shares and stop hyping the stock, the price typically falls, and investors lose their money.
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Quote from wilburbear:

How can some get away with recommending stocks - and then make a profit, while others can't?
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not only theirs, but pretty much everyone on wall st. here is an example :

http://www.elitetrader.com/vb/showthread.php?s=&postid=2778556&highlight=Sidoti#post2778556

how can fundamentals or opinion can change to exact opposite in less than a week? seems to me that if one can convince the judge or whatever that GS did hold the stock before let say upgrade-then technically it is falls into pump and dump scheme.
 
How this is legal I don't know but promotional newsletters, e-mails, mailers, etc. all carry a required SEC disclaimer. The disclaimer essentially warns you that they are paid to promote the stock, that their promotion is not a promotion or even a recommendation, that their information was all sourced from the company itself, that they and others are holding shares and may liquidate into the buying that their promotion creates, and that their liquidation of shares may drive the price down.

I received a penny stock promotion today and it has all these elements. The next time you see a stock promotion, read the disclaimer. The blatant manipulation is far worse than I ever would have imagined.

Google Tim Sykes or Street Sweeper for more info. Both have uncovered a lot of dirt on this type of activity. Tim even bases his trading strategy on it.
 
Quote from dwpeters:

Who says you can't? Not something I would do for moral reasons but obviously that doesn't stop everybody.
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I've seen the SEC discipline for "pump and dump."

But, I don't know why some can do it, and some can't. What's the difference?
 
who needs faxes, emails blasts when you can hire 50cent to just tweet some jibberrish about a company and have it soar 200%...

HNHI.

the SEC looked into it and I believe they found nothing illegal about it. I have not read anything recent so google to find out.
 
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