Key forms of market manipulation include:

1. Pump and Dump: This involves artificially inflating the price of a security through false or misleading statements, often spread via social media, newsletters, or other channels. Once the price has been pumped up, the manipulators sell off their holdings at the inflated price, leaving other investors to face significant losses as the price crashes.
2. Spoofing: In this tactic, a trader places a large number of buy or sell orders with the intention of canceling them before they are executed. The goal is to create the illusion of high demand or supply, thereby influencing the market price. Once the price moves in the desired direction, the manipulator cancels the orders and profits from the price change.
3. Wash Trading: This involves a trader or group of traders buying and selling the same security repeatedly to create the appearance of increased trading volume. The false volume can attract other investors, influencing the price and allowing the manipulator to profit.
4. Bear Raiding: This is a strategy where manipulators spread negative rumors or engage in aggressive selling to drive down the price of a security. Once the price falls, the manipulators buy back the security at the lower price, profiting from the decline.
5. Painting the Tape: In this scheme, traders execute a series of small trades at specific prices to give the appearance of increased activity in a security. This can mislead other investors into thinking that there is growing interest in the stock, leading them to buy or sell based on this false signal.
6. Cornering the Market: This occurs when a trader or group of traders accumulates enough of a particular asset, commodity, or security to control its price. By controlling supply, they can manipulate the price to their advantage, often resulting in significant profits at the expense of other market participants.
7. Churning: This involves a broker making excessive trades in a client’s account to generate commissions, without regard for the client’s investment objectives. While this primarily affects the client directly, it can also create misleading market signals.

Market manipulation is harmful because it distorts the fair and efficient functioning of financial markets, leading to losses for unsuspecting investors and undermining confidence in the market. Regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) actively monitor and prosecute cases of market manipulation to protect market integrity and ensure a level playing field for all participants.