Boiler Room : How much prison time would everyone get for the Pump and Dump scam?

How much prison time would everyone get for the Pump and Dump scam?

In the film J.T. Marlin is a chop stock brokerage firm that runs a "pump and dump", using its brokers to create artificial demand in the stock of expired or fake companies. When the firm is done pumping the stock, the investors then have no one to sell their shares to in the market, and the price of the stock plummets.

Seth is arrested by the FBI and forced to cooperate or go to prison, everyone else except for Vin Diesel's character presumably get arrested in the raid at the end of the movie by the police and FBI and Wall Street Financial Authority that raids the chop shop posing as a firm, they basically just continue working not knowing that they are about to get busted and arrested in large numbers and they will need good lawyers and even that probably would not save them from long prison sentences and heavy fines and long and drawn out courtroom battles.

Now the obvious question is what would the legal penalties be for engaging in the kind of scams that the company had been doing in the movie? Even the legitimate Brokers in the bar scene early on called J.T. Marlin a Chop Chop and correctly said that they named it like their own so that it would sound real, the fake Brokers at the firm took offense to this and threatened them.

The firm also kicked out the Broker at the first meeting that had a Series Seven License because as a legally trained and licensed Broker he would be able to spot the scams and see the legal danger that he would be in by working for the firm and thus report it once he realize what they were all about, they didnt want this to happen and got rid of him once they knew he was a real Broker and not some green kid that they could train and butter up with promises of quick wealth and few morals, this movie is loosely based on Stratton Oakmont and its owner Jordan Belfort who did several of the scams and worse in real life.

Re: How much prison time would everyone get for the Pump and Dump scam?

None, probably let off with a slap on the wrist, simply because none where experience brokers, all trained by JT Marlin which they trusted to teach them how todo things.

Any good lawyer to get it thrown out or bounced down to probation, but then again it is Wall Street-Esqe, so no jail time. (White COllar Crime)

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"Deadlands 2: Trapped" http://www.imdb.com/title/tt1103262/

Re: How much prison time would everyone get for the Pump and Dump scam?

Is Pump and Dump Illegal?

There are a variety of laws that make pump and dump illegal including:
Section 17(A) of the Securities Act of 1933:

The Securities Act prohibits anyone involved in selling or offering securities to participate in a scheme to defraud. Section 17(A) specifically criminalizes making material misstatements, omitting material facts, or otherwise participating in a scheme to defraud potential purchasers of securities.

Rule 10b-5 of the Securities Exchange Act of 1934: The Securities Exchange Act broadly prohibits any fraud, material misstatements, or material omissions in connection with the purchase or sale of securities.

18 U.S. Code Section 1343: This wire fraud statute criminalizes any fraud scheme that uses wire, radio, or television communications. If the Internet is used as part of a pump and dump scheme or if faxes are sent out to pump a stock, you can be charged with this offense.

18 U.S. Code Section 1341: This statute broadly prohibits fraud and swindles, including fraud schemes using the postal service. If false reports about the company or other marketing materials were sent via mail, you may be charged with postal fraud.
These are just a few possible federal charges that could result from participation in a pump and dump scheme.

Market manipulation including pump and dump scams is illegal on both the federal and state level and penalties if convicted could include a lengthy prison term.
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