Pump and dump

The fundamentals are sound.

"Pump and dump" is a form of financial fraud revolving around the artificial inflation and deflation of stock. Like other time-honored practices (such as "", "financial dickery", etc.), it counts as a form of insider trading.

Implementation
This scheme is implemented in two parts. The first is the "pump". Investors start a publicly traded company or buy stock in one, usually an obscure penny stock which has little independent information available about it. The investors then implement an astroturf campaign to hype the stock. This scheme can be executed with any obscure, thinly traded company. By the scheme's very nature, it doesn't matter what the underlying penny stock actually is. If anything, the more obscure and exotic and speculative, the better to keep away major investors who might sniff out a rat and to spin hype for the masses. In the past, the hype was usually done through newsletters or telemarketing offering tips on "hot" stocks and investments. Now it is more commonly done through spam and chain e-mails and internet comment boards. Pumping can also be instigated or increased through cooking the books to make a business look more profitable than it really is, i.e. accounting fraud.

Next comes the "dump". Once the stock is artificially inflated, the insiders stop hyping it and sell off their stock. This leaves them with nice fat profits while the dupes who bought the stock are left with something worth substantially less than what they paid for. It is possible, but extremely high risk, to buy in on the way up and sell quickly. This amounts to a bet of being one of the first ones out of the building when it catches fire. It also isn't anywhere near as lucrative as the stock holdings the main pumpers accumulated before you became aware of it.

Enron and federal bailout
Enron is often cited as one of the biggest pump and dump schemes in history. Large-scale financial bubbles tend to resemble a cross between a Ponzi scheme and a pump and dump scheme. Financial "journalists" (often useful idiots at CNBC), deluded stock traders, and get-rich-quick schemers (related to but not the same as Alan Greenspan) work as Wall Street cheerleaders to "pump" up a market. Then, when things turn sour, the crap is "dumped" on the taxpayer via bank bailouts and printing money to finance no-interest credit from the Fed. Capitalism at work!

Short and distort
A similar but inverted version of this scheme is called the "short and distort". This involves short selling stock in a company and then "distorting," i.e. spreading rumors that the company is facing imminent collapse or is tied in with some other failing enterprise. JP Morgan Chase, for example, was the victim of a massive short and distort campaign that played up the financial ties it had to Enron through a dummy corporation as it collapsed.