Poop and Scoop

An illegal scheme whereby unfavorable information about a stock is circulated, usually on the Internet, to drive down its price so it can be bought cheaply and later converted into a profit.
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Poop and Scoop

Definition

“Poop and Scoop” is an illegal stock manipulation scheme in which false or misleading unfavorable information about a stock is disseminated, typically through online platforms or social media, to drive down the stock’s price. The perpetrators of this scheme aim to purchase the stock at the artificially low price and subsequently profit from the stock’s recovery once the inaccurate information has been debunked or ignored.

Examples

  1. Anonymous Internet Forums: Perpetrators anonymously post fake negative news about a company on stock trading forums, causing panic selling among investors. They buy up the stock at its lowered price before the falsehood is revealed.
  2. Social Media Rumors: Scammers spread rumors on social media about a company’s mismanagement or impending financial troubles, driving down the stock price so they can purchase shares at a discount.
  3. Fake News Articles: Fraudsters publish negative articles on websites designed to look like legitimate financial news outlets, causing investors to offload the stock due to fear of financial losses.

Frequently Asked Questions

Q: How is “Poop and Scoop” different from “Pump and Dump”?
A: While “Poop and Scoop” involves spreading false negative information to lower a stock’s price for cheap purchase, “Pump and Dump” involves spreading false positive information to inflate a stock’s price before selling off stock holdings at a profit.

Q: What are the legal ramifications of a “Poop and Scoop” scheme?
A: Those caught engaging in a “Poop and Scoop” scheme can face severe legal consequences, including civil and criminal penalties from regulatory bodies such as the Securities and Exchange Commission (SEC) and fines or imprisonment.

Q: How can investors protect themselves from “Poop and Scoop” schemes?
A: Investors should verify information from multiple credible sources, exercise skepticism towards unverifiable news, and be cautious about making investment decisions based on anonymous tips or social media posts.

Q: Are there any notable cases of “Poop and Scoop” schemes?
A: One notable case involved several traders and investors who spread false negative news about multiple companies on various online stock discussion boards, resulting in federal charges and significant fines.

  • Pump and Dump: An illegal scheme where false or exaggerated positive information about a stock is disseminated to inflate its price, allowing perpetrators to sell their holdings at a profit.
  • Market Manipulation: Activities designed to deceive or defraud investors by controlling or artificially affecting the market for a security.
  • Short Selling: The sale of a security that the seller does not own, typically borrowed, betting that the stock’s price will decline.
  • Securities Fraud: Deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions based on false information.

Online References

Suggested Books for Further Study

  • “The Great Game: The Emergence of Wall Street as a World Power: 1653-2000” by John Steele Gordon
  • “The New Lombard Street: How the Fed Became the Dealer of Last Resort” by Perry Mehrling
  • “The Intelligent Investor: The Definitive Book on Value Investing” by Benjamin Graham
  • “Against the Gods: The Remarkable Story of Risk” by Peter L. Bernstein

Fundamentals of Stock Market Manipulation: Finance Basics Quiz

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