In such hoaxes, anonymous users set up accounts with names that sound like prominent market players, issue negative commentary, and spark massive declines. The selling that follows shows how the rapid spread of information on social media can make for volatile trading, and is a warning to investors who trade on news before fully verifying the source.
Pump and dump schemes aren’t the only sort of problem afflicting social media. Fortune’s Philip Elmer Dewitt has reported about his suspicions regarding hedge fund manager Doug Kass. According to Dewitt, Kass’ tweet repeating a rumor about an Apple stock split (which didn’t happen) led to a jump in the company’s stock valuation.