Cryptocurrency Pump-And-Dump Schemes∗
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Market Manipulation and Suspicious Stock Recommendations on Social Media
Market manipulation and suspicious stock recommendations on social media Thomas Renault∗a,b aIESEG´ School of Management, Paris, France bUniversit´eParis 1 Panth´eonSorbonne, Paris, France 14 April, 2018 Abstract Social media can help investors gather and share information about stock markets. However, it also presents opportunities for fraudsters to spread false or misleading statements in the mar- ketplace. Analyzing millions of messages sent on the social media platform Twitter about small capitalization firms, we find that an abnormally high number of messages on social media is associated with a large price increase on the event day and followed by a sharp price reversal over the next trading week. Examining users' characteristics, and controlling for lagged abnor- mal returns, press releases, tweets sentiment and firms’ characteristics, we find that the price reversal pattern is stronger when the events are generated by the tweeting activity of stock pro- moters or by the tweeting activity of accounts dedicated to tracking pump-and-dump schemes. Overall, our findings are consistent with the patterns of a pump-and-dump scheme, where fraud- sters/promoters use social media to temporarily inflate the price of small capitalization stocks. Keywords: Asset Pricing, Market efficiency, Market manipulation, Pump-and-dump scheme, Stock promotion, Small capitalization stocks, Social media, Twitter, Event study, Security and Exchange Commission JEL classification: G12, G14. ∗Electronic address: [email protected]; Corresponding author: Thomas Renault. PRISM Sorbonne - Universit´eParis 1 Panth´eon-Sorbonne, 17 rue de la Sorbonne, 75005 Paris, T´el.:+33(0)140463170 1. Introduction Market manipulation is as old as trading on organized exchanges (Putni¸nˇs, 2012). -
The Way It Is and the Way It Should Be
University of Miami Law School Institutional Repository University of Miami Business Law Review 7-1-2005 The aW y It Is and the Way It Should Be: Liability Under §10(b) of the Exchange Act and Rule 10b-5 Thereunder for Making False and Misleading Statements as Part of a Scheme to "Pump and Dump" a Stock David B. Kramer Follow this and additional works at: http://repository.law.miami.edu/umblr Part of the Law Commons Recommended Citation David B. Kramer, The Way It Is and the Way It Should Be: Liability Under §10(b) of the Exchange Act and Rule 10b-5 Thereunder for Making False and Misleading Statements as Part of a Scheme to "Pump and Dump" a Stock, 13 U. Miami Bus. L. Rev. 243 (2014) Available at: http://repository.law.miami.edu/umblr/vol13/iss2/5 This Article is brought to you for free and open access by Institutional Repository. It has been accepted for inclusion in University of Miami Business Law Review by an authorized administrator of Institutional Repository. For more information, please contact [email protected]. THE WAY IT IS AND THE WAY IT SHOULD BE: LIABILITY UNDER §10(b) OF THE EXCHANGE ACT AND RULE 10b-5 THEREUNDER FOR MAKING FALSE AND MISLEADING STATEMENTS AS PART OF A SCHEME TO "PUMP AND DUMP" A STOCK BY: DAVID B. KRAMER* "There cannot be honest markets without honest publicity. Manipulation and dishonest practices of the market place thrive upon mystery and secrecy."' I. INTRODUCTION Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") provides in relevant part that, "[i] t shall be unlawful for any person .. -
High Frequency Trading: a Bibliography
High Frequency Trading: A Bibliography March 2016 Contents Preface .......................................................................................................................................................... 3 Research Highlights ...................................................................................................................................... 4 Volatility ..................................................................................................................................................... 4 Manipulation .............................................................................................................................................. 6 Market Quality ........................................................................................................................................... 6 Investor Costs ........................................................................................................................................... 8 Evidence-Based Research Bibliography ..................................................................................................... 10 The Wall Street Journal's "Dark Market" Series (selected articles) ............................................................ 40 High Frequency Trading and "Insider Trading 2.0" ..................................................................................... 42 Press Editorials .......................................................................................................................................... -
Algorithmic and High-Frequency Trading Strategies: a Literature Review
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Mandes, Alexandru Working Paper Algorithmic and high-frequency trading strategies: A literature review MAGKS Joint Discussion Paper Series in Economics, No. 25-2016 Provided in Cooperation with: Faculty of Business Administration and Economics, University of Marburg Suggested Citation: Mandes, Alexandru (2016) : Algorithmic and high-frequency trading strategies: A literature review, MAGKS Joint Discussion Paper Series in Economics, No. 25-2016, Philipps-University Marburg, School of Business and Economics, Marburg This Version is available at: http://hdl.handle.net/10419/144690 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Joint Discussion Paper Series in Economics by the Universities of Aachen · Gießen · Göttingen Kassel · Marburg · Siegen ISSN 1867-3678 No. -
Front-Running' - Insider Trading Under the Commodity Exchange Act
Florida International University College of Law eCollections Faculty Publications Faculty Scholarship 1988 Front-Running' - Insider Trading Under the Commodity Exchange Act Jerry W. Markham Florida International University College of Law Follow this and additional works at: https://ecollections.law.fiu.edu/faculty_publications Part of the Banking and Finance Law Commons Recommended Citation Jerry W. Markham, Front-Running - Insider Trading under the Commodity Exchange Act, 38 Cath. U. L. Rev. 69, 128 (1988). This Article is brought to you for free and open access by the Faculty Scholarship at eCollections. It has been accepted for inclusion in Faculty Publications by an authorized administrator of eCollections. For more information, please contact [email protected]. +(,121/,1( Citation: Jerry W. Markham, Front-Running - Insider Trading under the Commodity Exchange Act, 38 Cath. U. L. Rev. 69 (1988) Provided by: FIU College of Law Content downloaded/printed from HeinOnline Mon Aug 27 16:17:37 2018 -- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at https://heinonline.org/HOL/License -- The search text of this PDF is generated from uncorrected OCR text. -- To obtain permission to use this article beyond the scope of your HeinOnline license, please use: Copyright Information Use QR Code reader to send PDF to your smartphone or tablet device ""FRONT-RUNNING"-INSIDER TRADING UNDER THE COMMODITY EXCHANGE ACT Jerry W. Markham* On "Black Monday," October 19, 1987, "perhaps the worst day in the history of U.S. equity markets," the Dow Jones Industrial Average fell by 508 points, representing a loss of approximately $1 trillion' in the value of all outstanding United States stocks. -
Action Memorandum
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION UNITED STATES SECURITIES AND EXCHANGE COMMISSION, Civil Action No. Plaintiff, v. COMPLAINT DARREL T. USELTON and JACK E. USELTON, Defendants. JURY DEMANDED Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”) for its complaint alleges as follows: NATURE OF THE CASE 1. This case concerns the use of computer “botnets” to pump and dump multiple penny stocks as part of a serial “scalping” and market manipulation scheme by the Defendants, Darrel T. Uselton and his uncle, Jack E. Uselton (collectively, the “Useltons”), two Texas-based securities law recidivists. 2. Botnets, or proxy bot networks, are networks typically comprised of broadband Internet personal computers that, although their owners are unaware of it, have been infected with malicious viruses or malware to forward transmissions (including spam or viruses) to other computers on the Internet. Scalping refers to the practice of recommending that others purchase a security while secretly selling the same security in the market. From May 2005 through December 2006, the Useltons made more than $4.6 million by obtaining cheap stock from at least thirteen (13) companies quoted on the “pink sheets” and then selling those shares into an apparently active, and often-times rising, artificial market they created through manipulative trading, spam email campaigns, direct mailers, and internet-based promotional activities. “Pink sheets” refers to over-the-counter trading of stocks that are traded in some context other than on a formal exchange such as the New York Stock Exchange (“NYSE”) or the American Stock Exchange. Many stocks quoted in the pink sheets do not meet the minimum requirements to trade on an exchange such as the NYSE nor do they file periodic reports with the SEC. -
Request for Rulemaking on Short and Distort
February 12, 2020 Vanessa Countryman Secretary U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-1090 Re: Petition for Rulemaking on Short and Distort Dear Ms. Countryman: Petitioners signed below respectfully submit this petition for rulemaking pursuant to Rule 192(a) of the Commission’s Rules of Practice.1 I. Background Short selling serves a critical function in the capital markets by encouraging price discovery and preventing the formation of asset bubbles.2 But recent years have seen a rise in “negative activism,” a novel phenomenon which has flourished in the era of social media and algorithmic trading.3 The typical negative activist opens a large short position; disseminates sometimes aggressive negative opinion about a public company (often stopping just short of factual falsehoods) on Twitter and elsewhere, which induces a panic and run on the stock price;4 and rapidly closes that position for a profit, prior to the stock price partially or fully rebounding.5 1 This petition arose out of by Professors John C. Coffee, Jr. and Joshua Mitts of Columbia Law School. Professor Mitts has served as an expert in connection with market manipulation cases involving short sellers. 2 See, e.g., Merritt B. Fox et al., Law, Short Selling and the News: A Preliminary Report on an Empirical Study, 54 N.Y. L. SCH. L. REV. 645 (2009) (finding that an increase in short selling predicts negative news the next day and summarizing the theoretical and empirical literature on short selling and price discovery). 3 See, e.g., Barbara A. Bliss et al., Negative Activism, 97 WASH.