Let’s say, for example, you receive an email, text message, or fax spam about a stock that they say will go up in value, and at the same time the share price is up 15% because someone else is buying it. Then you short sell it because you know it won’t stay up for long and that it’s just a pump and dump. You have absolutely nothing to do with the pump and dump and don’t know the other people who are actually doing it.

1. Is it illegal for me to short sell the stock?
2. Would then even work?
3. Do stocks still move when a pump and dump scam happens or is that something that just happened back in the 90’s with the advent of the Internet and the slow response of the SEC in regulating?

You can not do this. This is illegal because you are trying to profit off of what you believe to be illegal activity. Proving it might be another matter but being hard to prove doesn’t make something legal.

This very likely will not work. Any stock small enough to be able to be affected by a pump and dump likely can’t be shorted (i.e. over $5). And anybody allowing you to short a stock like that which they own is going to want a high premium and there goes your profit. You are assuming the person selling you the short position is ignorant of the stock or the pump and dump scheme.

Stocks that can be influenced with a pump and dump are basically a fraud and many of those stocks are fraudulent from the start or are extremely high risk even without the manipulation.

If you lie with “dogs”, you will probably get fleas.

Also, if you are that hard up for a good stock pick that you have to try and time pump and dump scams in penny stocks, you need to go back to “investor school” and learn how to trade before you lose everything.