The capital market plays a vital role as a legal instrument in supporting national economic growth. In Indonesia, capital market activities are explicitly regulated under Law No. 8 of 1995 on the Capital Market and are supported by public confidence in capital market instruments as a means of generating financial returns. However, in practice, manipulative activities still occur, including pump and dump schemes, which are risky for investors and disrupt market stability.
Therefore, on this occasion, SIP Law Firm will present an article discussing the definition, mechanisms, and legal protections for investors who fall victim to pump and dump practices. So, let’s take a look at the article below!
Understanding “Pump and Dump” in the Stock Market
In the digital age, the abundance of information easily accessible via the internet has fueled the public’s growing knowledge of investment activities. As a result, people are becoming increasingly familiar with various types of investment instruments and view investing as a means to generate profits in the economy.
Gaining the public’s trust is something to be grateful for, whether for the country or for companies that provide investment facilities to the public. However, this does not rule out the possibility of fraud committed by irresponsible parties, one of which involves manipulating stock data, a practice known as “pump and dump.”
Basically, “pump and dump” is a form of data manipulation where the price of a specific stock or asset is artificially and excessively inflated, only to be sold off in large quantities once the price has risen sufficiently, with the aim of reaping profits. This price surge is generally not based on the company’s performance or fundamentals but is driven by the dissemination of misleading information.
How Pump and Dump Works
Pump and dump practices are generally carried out in a systematic, structured, and planned manner. Typically, pump and dump practices are carried out by high-net-worth investors who are able to influence small-cap stocks that are relatively easy to manipulate.
In the early phases, the perpetrators, who are high-net-worth investors, select and identify the stock to be used as the primary target (typically low-value stocks). They then gradually purchase large quantities of these shares.
In the next stage, once the shares have been sufficiently accumulated, the perpetrators spread information about the stock, whether through social media, chat groups, or influencers, with the aim of attracting investors to buy the stock. Through positive feedback, the perpetrators can capture investors’ attention, thereby increasing demand for the stock. As a result, the stock price surges rapidly.
When the price reaches its peak, the pump-and-dump perpetrators sell their shares in large quantities all at once. Naturally, there is a risk of strong market pressure, which can cause the stock price to plummet. At this stage, other investors typically join in selling shares out of fear that prices will continue to fall. In this scenario, the biggest gainers are the pump-and-dump perpetrators, who successfully sold their shares at the peak, while other investors who bought at the peak will take a loss.
Legal Protection for Investors Victimized by Pump-and-Dump Practices
The Republic of Indonesia has established a fairly comprehensive legal framework to protect investors from market manipulation, including pump-and-dump practices. One of the primary legal foundations is Law No. 8 of 1995 on the Capital Market (“Capital Market Law”), specifically Chapter XI, Articles 90 through 98 of the Capital Market Law, which was subsequently amended by Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (“PPSK Law”), which prohibits pump-and-dump practices.
Essentially, preventive measures against pump-and-dump practices can be implemented through financial education and literacy initiatives by the Financial Services Authority (OJK). In this regard, the OJK can actively educate the public on the characteristics of stocks that are potentially subject to manipulation, including abnormal price movements and unverifiable information.
The existence of pump-and-dump practices certainly risks undermining market stability and harming investors. In response, Article 104 of the Capital Market Law explicitly stipulates criminal penalties (as a repressive protective measure) in the form of up to one year imprisonment and a fine of up to 1 billion rupiah for perpetrators of pump-and-dump schemes. Furthermore, any victim who suffers losses due to pump-and-dump practices is entitled to file a claim for compensation as stipulated in Article 111 of the Capital Market Law.
The regulation of pump-and-dump practices in Indonesia’s current laws reflects the government’s awareness of the dangers these practices pose to both the capital market and investors. Therefore, through a combination of preventive and repressive measures, it is hoped that pump-and-dump practices can be minimized, and public confidence in the capital market maintained.
The “pump and dump” practice is a form of market manipulation that harms investors and disrupts the stability of the capital market. This scheme works by manipulating stock prices not based on a company’s fundamentals, but through the dissemination of misleading information. Under Indonesian law, such actions are strictly prohibited and may result in both criminal and civil penalties. Therefore, understanding the mechanics of pump and dump schemes and exercising caution when investing are key for investors to protect themselves from potential losses.***
Daftar Hukum:
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- Undang-Undang Nomor 8 Tahun 1995 tentang Pasar Modal (“UU Pasar Modal”)
- Undang-Undang Nomor 4 Tahun 2023 tentang Pengembangan dan Penguatan Sektor Keuangan (“UU PPSK”).
Referensi:
- Mengenal Konsep Pump and Dump dalam Saham. Pina. (Diakses pada 8 April 2026 Pukul 10.02 WIB).
- Mengenal Skema Pump and Dump pada Saham. Ajaib. (Diakses pada 8 April 2026 Pukul 10.47 WIB).
- Herlambang, E., & Astawa, I, K. (2025). Perlindungan Hukum bagi Investor dari Praktik Manipulasi Harga Saham di Pasar Modal dan Relevansi Sanksi Berdasarkan Undang-Undang Nomor 8 Tahun 1995 tentang Pasar Modal (Studi Kasus PT. Jiwasraya). Yustisi, Vol. 12, No. 1, Hal. 92. (Diakses pada 8 April 2026 Pukul 11.40 WIB).
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