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This is an old revision of this page, as edited by 70.23.226.239 (talk) at 18:29, 26 February 2010 (New source for first passage is house organ of US Chamber (not a reliable source).; second is not supported by the two sentence SEC description of pump and dump). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

"Short and distort" is a type of securities fraud in which Internet investors short sell a stock and then spread negative rumors about the company in an attempt to drive down stock prices. Cell phones and text-based messaging are the primary tools for the people committing "short and distort" as they tend to hide the source of the information.

Once the stock price has declined, the investor uses the proceeds of the initial sale to buy a larger number of the company's shares than sold originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the remaining shares are then offered for sale, which causes an additional decline in the company's share price.

During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. United States Senator Christopher Dodd said this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "dump and distort" scheme six years earlier when rumors arose about its purported relationship with Enron.

References

1. Investopedia entry of "short and distort" - Forbes
2. Glasner, Joanna. "New Market Trend: Short, Distort". Wired. Condé Nast Digital. Archived from the original on February 11, 2010. Retrieved February 11, 2010. {{cite web}}: Check date values in: |accessdate= and |archivedate= (help)
3. Cheating in a bear market: Short and distort - Kroll Global Fraud Report
4. Cheating in a bear market: Short and distort - Kroll Global Fraud Report
5. "A New Wave of Vilifying Short Sellers" New York Times 30 April 2008
6. In a 22 July 2001 hearing of a Senate subcommittee, questions were raised about a "maze of financial transactions that . . . makes Rube Goldberg look like a slacker" to which Chase was one of several banks was a party. Rumors flowed about Chase starting the day after the hearing; on 23 July 2001, Chase's stock prices dropped to a six year low (James Surowiecki, "Short and Distort" New Yorker 12 August 2002)

See also

• Emulex hoax
• Naked short selling
• Pump and dump
• Short selling

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