Is leveraging notoriety to raise stock prices illegal in the US?
"There are obviously lots of complexities here, and there are rules against price or market manipulation that are somewhat interpretive due to the rules' inclusion of the manipulator's intent, but: Generally speaking, you can publicly promote the value of a company whose stock you own provided that you: Now, if you extol the value of a company publicly, and sell it immediately thereafter, ""pump and dump,"" the regulators might suggest that your actions imply that you didn't believe it was so wonderful, and were misleading the public to move the price.     That said, a fair retort might be that you loved it for all the reasons you said at [lower price], but thought it had run its course once it got to [higher price].   Again, if it can be demonstrated that your reason for praising it was to push the price higher, your intent may land you in hot water. This isn't legal advice or a full analysis, but if Fitty essentially declared his honest reasons for loving a stock in which he is invested, and discloses that investment, letting others know he is biased, he's probably ok, especially if he intends to hold it long term." "Yes, there are legal problems with what he did. To prevent fraud, the US government regulates who can give public investment advice and how they can do it. If you're getting paid to advise an individual, you have to pass certain examinations and maintain ongoing government certification. If you hold a position in a stock you're touting, you legally have to disclose it using particular language. And if you're a corporate insider or hold a significant position in a company, you're restricted on what you can say about the company and when you can say it. Mr. Jackson, aka 50 Cent, held a significant position in the company he tweeted about. My guess is the guys in the suits came to visit Mr. Cent, because if you go to the article the OP links to, at the bottom they mention Mr. Cent's tweet has been deleted and replaced with ""go talk to your investment advisor""." pump and dump is a common Illegal practice of boiler room operations. It refers to the talking a stock up, both through word of mouth as well as selling shares to unwitting buyers. I fail to see much difference between that practice and this. "If he didn't lie, I don't see the issue. He did not force anyone to buy anything. His opinion was stock X is good, he publicized it and it turned out to be true (at least temporary) - what's wrong with it?  It is customary for people who have either fiduciary duty towards the clients or are perceived as independent analysts to disclose their interest and potential conflict of interest, lest they lose the respect of the public as independent and trustworthy sources of financial information. Jackson never had that, express or implied, and never had the duty to provide anybody with impartial financial analysis, so he can say anything he wants. He can invest into the company and promote it and make money from it - isn't it what was called ""business"" once? Why is it even being questioned?"
"The SEC regulation on insider trading is ""engage in the purchase and sale of any security on the basis of material non public information"".  The case I remember off the top of my head is Kodak developing an instant photo camera in the 1970s, and about 4 months before Kodak made this knowledge public, the CBOE had to close options trading on Polaroid because they had an excessive buildup of uncovered short positions." Not illegal, its called treasury stock; happens all the time. Its used to increase the equity (and in theory, stock price) for the remaining shareholders.  A public company won't be a able to repurchase all of its shares unless the company has decided to go private. In that case, a person or other entity will usually purchase all of the outstanding shares of the company, usually at a premium. "Legally ok? Sure. Friends frequently discuss financial matters, and share advice. This is quite far from taking money from them and managing it, where at some point you need to be licensed for such things. If you're concerned about giving bad advice, just stay generic. The best advice has no risk. If I offer a friend a stock tip, of course there's the chance the stock goes south, but when I tell a friend who asks about the difference between Mutual Funds and ETFs, and we discuss the expenses each might have, I'm still leaving the decision as to which ETF to him. When I offer the 'fortune cookie' soundbites like ""If you are going to make a large purchase, delay it a week for each $100 of value. e.g. if you really want a $1000 TV, sleep on it for a few months"" no one can mis-apply this.  I like those two sites you mentioned, but the one-on-one is good for the friend and for you. You can always learn more, and teaching helps you hone your skills." "I'm not the OP, but I'm happy to give a brief overview.  Basically, pre-JOBS act there were a lot of limits on who could make an equity investment in a non-public company (i.e. a startup or even a hedge fund). There were some loopholes, but basically you had to be an 'accredited investor'. An accredited investor was someone who either has made $200,000+ ($300,000+ for married people) for the past two years and expects to make that much again in the current year. Alternately, they could have a net worth of $1 million, excluding the value of their primary residence. There was also a limit of 500 investors for a non-public company before the company had to become public (they didn't really have to IPO, but they did have to file their financials with the SEC, so the effect was basically the same). Finally, non-public companies were prohibited from seeking investment through advertising basically. They couldn't take out an ad in a paper or event send a mass email and say, ""Hey, we're looking to raise a $1 million funding round, contact us if you're interested!""  Okay, now after the JOBS Act.  The JOBS Act changed a) the number and type of investors who could make equity investments in a non-public company b) the regulation of advertising for investments.  Post-JOBS private companies could have 2,000 shareholders and 500 of those could be unaccredited (e.g. regular people like you and I). The change in the number of shareholders isn't really that important because it's just shareholders of record, but that's another post for another day. There are still some requirements for unaccredited shareholder, which I don't remember off the top of my head. I think you have to have income of at least $40k. They also changed the solicitation ban, so it's possible that you might see an ad in the WSJ someday for a startup company, venture capital fund, hedge fund, etc.  There are some other things it changed, but IMO those are the two most important." To be flippant: it is illegal because it is against the law; there is no considered involved, it just is. To elaborate, part of the illusion of the stock exchange and other market-like entities is that of (apparent) fairness. If I think a stock will go up because it is involved in a growing industry, that is generally public information.  Conversely if I have a dim view of a particular company because of its track record of product launches, that is similarly out in the open. A secret formula is something that I invented or discovered, not (presumably) something that I stole from someone else. To stretch that further: If I notice that Company X stock always moves with Company Y stock, that is indeed something that I have found, that I can try to profit from.  It is secret to me, but not particularly dependent upon information not available to others, just that my interpretation is better. So trading on information in the public domain is fine, as it preserves the principal of fairness I mentioned, whereas inside knowledge breaks that principal. "There are situations where you can be forced to cover a position, particular when ""Reg SHO"" (""regulation sho"") is activated. Reg SHO is intended to make naked short sellers cover their position, it is to prevent abusive failure to delivers, where someone goes short without borrowing someone else's shares. Naked shorting isn't a violation of federal securities laws but it becomes an accounting problem when multiple people have claims to the same underlying assets. (I've seen companies that had 120% of their shares sold short, too funny, FWIW the market was correct as the company was worth nothing.) You can be naked short without knowing it. So there can be times when you will be forced to cover. Other people being forced to cover can result in a short squeeze. A risk. The other downside is that you have to pay interest on your borrowings. You also have to pay the dividends to the owner of the shares, if applicable. In shorter time frames these are negligible, but in longer time frames, such as closer to a year or longer, these really add up. Let alone the costs of the market going in the opposite direction, and the commissions." "This probably won't be a popular answer due to the many number of disadvantaged market participants out there but: Yes, it is possible to distort the markets for securities this way. But it is more useful to understand how this works for any market (since it is illegal in securities markets where company shares are involves).  Since you asked about the company Apple, you should be aware this is a form of market manipulation and is illegal... when dealing with securities. In any supply and demand market this is possible especially during periods when other market participants are not prevalent. Now the way to do this usually involves having multiple accounts you control, where you are acting as multiple market participants with different brokers etc. The most crafty ways to do with involve shell companies w/ brokerage accounts but this is usually to mask illegal behavior In the securities markets where there are consequences for manipulating the shares of securities. In other markets this is not necessary because there is no authority prohibiting this kind of trading behavior. Account B buys from Account A, account A buys from Account B, etc. The biggest issue is getting all of the accounts capitalized initially. The third issue is then actually being able to make a profit from doing this at all. Because eventually one of your accounts will have all of the shares or whatever, and there would still be no way to sell them because there are no other market participants to sell to, since you were the only one moving the price. Therefore this kind of market manipulation is coupled with ""promotions"" to attract liquidity to a financial product. (NOTE the mere fact of a promotion does not mean that illegal trading behavior is occurring, but it does usually mean that someone else is selling into the liquidity) Another way to make this kind of trading behavior profitable is via the derivatives market. Options contracts are priced solely by the trading price of the underlying asset, so even if your multiple account trading could only at best break even when you sell your final holdings (basically resetting the price to where it was because you started distorting it), this is fine because your real trade is in the options market. Lets say Apple was trading at $200 , the options contract at the $200 strike is a call trading at $1 with no intrinsic value. You can buy to open several thousand of the $200 strike without distorting the shares market at all,  then in the shares market you bid up Apple to $210, now your options contract is trading at $11 with $10 of intrinsic value, so you just made 1000% gain and are able to sell to close those call options. Then you unwind the rest of your trade and sell your $210 apple shares, probably for $200 or $198 or less (because there are few market participants that actually valued the shares for that high, the real bidders are at $200 and lower). This is hardly a discreet thing to do, so like I mentioned before, this is illegal in markets where actual company shares are involved and should not be attempted in stock markets but other markets won't have the same prohibitions, this is a general inefficiency in capital markets in general and certain derivatives pricing formulas. It is important to understand these things if you plan to participate in markets that claim to be fair. There is nothing novel about this sort of thing, and it is just a problem of allocating enough capital to do so." sweet, a Nazi analogy.  And here I thought I'd *never* see one of those on the internet!  A better example would be to arrest gun manufacturers because they created guns that were used in murders.  Chances are this program was created for legitimate reasons. There's nothing illegal about using software to buy stock. There is, however, rules against doing things like this to influence the market.   You're equating some software developers whose software was used illegally to a group of people who committed genocide.  Think about that. "It's not a pyramid scheme, pure pyramid schemes are illegal. ""Multi Level Marketing"" is technically legal, most stay within the legal boundaries but it's easy for a ""self-employed"" individual to step into the illegal realm by using deceptive sales tactics.   When it's commission based renumeration Herbalife doesn't care who exactly makes the sale, just that someone did. That's no different than Google Adwords.  Yes it is exploitative business practices and taking advantage of people who don't know better, but it doesn't appear illegal to me." "I am not a lawyer, but I can't think of a reason this is illegal (something that would be illegal would be to ""trade with yourself"" across the accounts to try to manipulate stock or option prices). I don't think you're ""funneling,"" you're doing ""asset location"" which is a standard tax planning strategy. http://news.morningstar.com/articlenet/article.aspx?id=154126&t1=1303874170 discusses asset location. I'd be more concerned about whether it makes sense." "One scenario described in the original question -- a non-insider who trades after informal conversations with friends, where no insiders directly benefit from any such disclosure -- might not be illegal.  (IANAL -- this is just my personal interpretation of articles in the news recently.) http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-cases-imperiled-as-top-u-s-court-spurns-appeal the appeals court said prosecutors needed to show that the person disclosing the information received a clear benefit -- something more than the nurturing of a friendship ... In a 1980 case the Supreme Court rejected the idea of “a general duty between all participants in market transactions to forgo actions based on material, nonpublic information.""" "This information is clearly ""material"" (large impact) and ""non-public"" according to the statement of the problem.  Also, decisions like United States v. Carpenter make it clear that you do not need to be a member of the company to do illegal insider trading on its stock. Importantly though, stackexchange is not a place for legal advice and this answer should not be construed as such.  Legal/compliance at Company A would be a good place to start asking questions." The principle of demand-supply law will not work if spoofing (or layering, fake order) is implemented. However, spoofing stocks is an illegal criminal practice  monitored by SEC. In stock market, aggressive buyer are willing to pay for a higher ask price pushing the price higher even if ask size is considerably larger than bid size, especially when high growth potential with time is expected. Larger bids may attract more buyers, further perpetuating a price increase (positive pile-on effect). Aggressive sellers are willing to accept a lower bid price pushing the price lower even if ask size is considerably smaller than bid size, when a negative situation is expected. Larger asks may attract more sellers, further perpetuating a price fall (negative pile-on effect).  Moreover, seller and buyers considers not only price but also size of shares in their decision-making process, along with marker order and/or limit order. Unlike limit order, market order is not recorded in bid/ask size. Market order, but not limit order, immediately affects the price direction. Thus, ask/bid sizes alone do not give enough information on price direction. If stocks are being sold continuously at the bid price, this could be the beginning of a downward trend; if stocks are being sold continuously at the ask price, this could be the beginning of a upward trend.  This is because ask price is always higher than bid price. In all the cases, both buyers and sellers hope to make a profit in a long-term and short-term view Using inside sensitive information about corporate and using the same to deal in securities, before the exchanges are made aware of the information. Its mostly used in derivatives to get maximum returns on investmens, but Its illegal in all the exchanges "Perhaps mysterious in the sense that any dubious story involving a powerful and influential firm will not have their name actually mentioned?  I've often found when American media runs a story like this, with no details, I can go look at London's Financial Times and they will name-names.  For example CNBC or CNN might run a story ""top wall street firms fined"" and not name the actual firms.  You have to look at non-American media to get actual names."