The Anatomy of a Pump-‘n’-Dump Stock Scheme

At a DMA convention I bumped into a copywriter I had known for 30 years and asked what he was up to. “I specialize in pump-‘n’-dump.”


“If you need capital for your company, I can help you pump up the price of your stock and then you can dump it on speculators.”

The envelope I recently received (See “IN THE NEWS” and the first image in the mediaplayer at the right) smelled of my friend’s work.

An envelope that promises me 813% profits gets my attention.

I decided to look into this stock and try to understand what was going on.

Taking a cue from Watergate’s Deep Throat, it made sense to “follow the money.”

The Faux IPO
On Feb. 1, Facebook finally announced its intent to launch a multibillion dollar initial public offering (IPO). With 810 million members in 70 languages and $3.7 billion in revenue last year, CEO Mark Zuckerberg’s coming anointment as the 28th richest man in the world is slam-dunk.

But what if you’re a young Florida company with 40.1 million shares outstanding (and 250 million authorized shares) and you reported a net loss of $2.9 million on gross sales of $2.6 million for the nine months ended Sept. 30, 2011?

Hardly a stellar performance …

Such was the case with LTS (LiveTheSource) Nutraceuticals that markets dietary supplements via a new and improved multi-level-marketing (MLM) business model dubbed Inline Marketing™. It recently hired TV celebrity Dr. Bob Arnot as Chief Educator and Wellness Officer, acquired three companies and announced a move into the Asian markets.

There are four ways to infuse a struggling little business with working capital:

  1. Be acquired by a larger company.
  2. Find a sugar daddy (or sugar mama) who believes in you and puts up a ton of cash in return for equity.
  3. Mortgage everything you own, borrow money from daddy, mummy, grandparents and everybody you know, as well a max out your credit cards and borrow from your 401(k).
  4. Persuade the financial community that your stock is about to go through the roof and urge investors to get in on the gravy train before it leaves the station.

Using direct marketing, it’s possible to launch a Blitzkrieg multimedia publicity and payola campaign designed to pump up the value of the stock. The aim is to create a feeding frenzy that so excites investors that they will snap up shares in the hopes that they will go up, up, up, winding up as the next Apple or Google.

The ideal candidates for this type of promotion are penny stocks—so cheap that any move up can represent a huge percentage gain.

(Conversely, if they go down, you’re left hanging by your toes.)

In the book promotion business, the equivalent technique was pioneered by Marji Ross, the genius CEO of Regnery Publishing. Using “Blitzkrieg PR”, Ross has catapulted half of all Regnery titles onto The New York Times bestseller list. Hers is a record to die for—unmatched in the book world.

Quite simply, a Blitzkrieg PR campaign in book publishing means going dark for a month and then during a single week you assault the marketplace with everything in your arsenal: press releases, 100,000 emails, review copies, radio interviews and TV appearances by the author. For example during the Blitzkrieg, Regnery will schedule for the author 15 to 20 interviews a day for that entire week.

What follows are the four major elements of the LTSN Blitzkrieg that 1) exponentially expanded the presence of this little-known nutraceuticals company all over the Internet and 2) shoved it into the faces of investors; destroyed the value of the stock, driving it down from $1.11 to 19¢.

Denny Hatch is the author of six books on marketing and four novels, and is a direct marketing writer, designer and consultant. His latest book is “Write Everything Right!” Visit him at

Publish date: February 21, 2012 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT