What is YouTube Pump and Dump scam? How does it affect investors?

Influencers on social media are one of the fastest-growing trends in the world. They present their views on a variety of subjects, and many of those views may interest you keenly.

Though experts in their respective fields who also have verified accounts can be believed easily, it is always impossible to fully gauge the authentication of those advices.

But what if an influencer intentionally suggests you to follow a trend that is misleading and can harm you in the long run? Such a premise forms the basis of the YouTube Pump and Dump Scam. 

How YouTube Pump and Dump Scam works?

An influencer passes unverified, misleading information about a company to spark the audience's interest in the firm's share, which is most likely to be at a low price as it can be purchased easily.

They extol the benefits of investing in that company and hold its principles, management, and work culture in high esteem.

Their audience gets the impression that the company has a bright future and that its shares will perform well.

They purchase that share in hordes, and that process artificially inflates its price.

Influencers also purchase the same share in large numbers.

Once the share price reaches an unreasonably high level, influencers dump their shares to earn huge profits.

As a result of offloading, the share price slides drastically, resulting in huge losses for the audience.

The same trend has garnered a fair share of notoriety in the cryptocurrency world.

How Scammers Run Pump and Dump Scam

Influencers generally operate on their own.

Through sensational claims, they create a fan following.

They know their target audience and make them believe they will become rich soon by investing in a particular share.

Sometimes influencers think that they need to present their points more emphatically and make their audience believe that some renowned personalities are associated with the share.

People fell prey to their extolling claims.

Such YouTube scammers may ask you to join a particular course or attend a particular event, which, in the long run, may be of no use to you, but you may end up losing your money in that trap.

Many times the money that individuals lose is not of a high magnitude, but scammers make good money as they engage thousands, or sometimes lakhs, of followers.

In March, the Securities Exchange Board of India barred actor Arsahd Warsi, her wife Maria Goretti, and others from promoting the shares of Sadhna Broadcast through uploading videos.

The share price of the said company rose, and the actor and promoters allegedly made huge profits the price soared considerably,

However, later Securities and Appellate Tribunal set aside SEBI's order against Warsi and Goretti.

One of the best examples of YouTube's Pump and Dump Scam was an event in Noida in March, which was dubbed the 'world's biggest funding festival', promising start-up founders the biggest investors in the country they could meet and speeches from central ministers as acclaimed as Nitin Gadkari (transport) and Mansukh Mandaviya (health).

The event was highly hyped through social media, and people were asked to submit a registration fee to participate in the event.

Neither the minister nor major investors reached the destination, and the event turned out to be a false promise. The event went on, but it was a pale shadow of what it was promised to be.

Sebi calls such practises fraudulent and unfair trade practises, which can disturb the sanctity of Indian share markets.