Pump and Dump is protected by First Amendment

The practice of pump and dump is scheme whereby a person takes a long position and then uses media outlets (internet, TV, print) to pump up the stock, hoping that the public would buy the stock. The pumper then dumps the stock at a profit.  Short-selling and then offering negative opinions is an equivalent scheme.  Perhaps there should be a term for this like:  “Short and Dump on”; or “Dump on and Cover Short”.

The Financial Post reports that U.S. court gives short-sellers freedom of speech shield in Silvercorp ruling:

Vancouver-based Silvercorp, which operates in China, was one of the most high-profile companies targeted by short-sellers last year. Anonymous websites Alfredlittle.com and Chinastockwatch.com posted reports within days of each other, both suggesting the reported production and resource figures from the company’s Ying mine were too good to be true.

Silvercorp fought back. It figured out who was behind the anonymous sites and named them as defendants in a defamation and stock-manipulation suit. The company is disappointed it was dismissed, and has already filed an appeal.

I suppose this means that SEC should return Jonathan Lebed his money, since what he did as a fourteen year old was far more innocent.

Petrobakken manipulation: who is going to pay the fine this time SEC?

A few months ago I wrote a post critical of the hardline that the SEC took against Jonathan Lebed for so-called “pump & dump”.  Lebed was a 15 years old at the time, and he was promoting penny stocks that he liked using bulletin boards and the like.  It turned into a pretty lucrative trade for him, but the SEC made him pay a huge fine.  I said that it was not right for them to go after some kid, when the people on Wall Street do this sort of thing all the time.  Today, I think I found an example with one of the securities that I trade, Petrobakken.

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