How does a pump and dump stock scam work?

"Pump and dump" schemes, also known as "hype and dump manipulation", involve the promotion of a company's stock through misleading or outright false statements to the marketplace. This happens most typically with microcap companies. After "pumping" the stock, the scammers make huge profits by selling their cheap stock into the market. This often occurs through telemarketing or internet promotion. A scammer will send a message telling people to hurry and buy the stock before the price goes down. They'll usually claim to have "inside information" or some "infalliable economic and Stock Market methods" to pick stocks. In reality, they are usually company insiders or paid promoters. Once the fraudsters "dump" their stock by selling it at the inflated price, they will stop hyping the stock, and the investors lose money.