Detecting Pump &Dump stock market manipulation from online forums

The intersection of social media, low-cost trading platforms, and naive investors has created an ideal situation for information-based market manipulations, especially pump &dumps. Manipulators accumulate small-cap stocks, disseminate false information on social media to inflate their price, and sell at the peak. We collect a dataset of stocks whose price and volume profiles have the characteristic shape of a pump &dump, and social media posts for those same stocks that match the timing of the initial price rises. From these we build predictive models for pump &dump events based on the language used in the social media posts. There are multiple difficulties: not every post will cause the intended market reaction, some pump &dump events may be triggered by posts in other forums, and there may be accidental confluences of post timing and market movements. Nevertheless, our best model achieves a prediction accuracy of 85% and an F1-score of 62%. Such a tool can provide early warning to investors and regulators that a pump &dump may be underway.