Hong Kong’s SFC Arrested 24 Perpetrators for Pump-and-Dump Scam

In a combined investigation with the local police, 24 people have been charged with market manipulation by Hong Kong's financial watchdog, the Securities and Futures Commission (SFC).

One of the accused is the head of a sophisticated syndicate, according to the authorities, that ran ramp-and-dump scams through a convoluted cross-shareholding network of Hong Kong-listed businesses. They were detained as part of a combined operation between the Independent Commission Against Corruption (ICAC) and the Securities and Futures Commission (SFC).

The SFC also stated that the fraudulent plan targeted the shares of six publicly traded firms and generated unlawful gains of $191 million.

The HK watchdog named the suspects of this market wrongdoing and further highlighted that they were conspiring to use multiple nominee accounts to corner the shares of the target stocks and drive up their prices. The chairman of a Hong Kong-listed business and three responsible officials from two brokers are among the arrestees who are the key members of the syndicate.

A large-scale, highly developed conspiracy accused of participating in ramp-and-dump market manipulation was the subject of money laundering charges against two further suspects who made an appearance before the Eastern Magistracy last week, according to the regulator.

Later on, it was claimed that the scheme used various social media sites to persuade investors to buy those shares. The defendants then aggressively sold their shares at a profit just as the price started to fall as soon as the demand dried up.

The regulator warned the public to be highly aware of the ever-changing profile of financial fraud as more people are now being targeted online rather than the traditional cold calls. Fraudsters are now lurking on a variety of well-known social media platforms, including Facebook, Instagram, WeChat, Whatsapp, Telegram, and even online dating services.

The financial watchdog did not forget to caution investors to pay careful attention when presented with so-called “insider information” or investing advice online, especially when complete strangers advertise small-cap or less liquid stocks on social media.

According to SFC data, these types of fraudulent schemes that aim to increase or decrease a stock's price through recommendations based on incorrect or misleading advice account for 20% of the market manipulation cases the authority body is now looking into.

The perpetrators of so-called “ramp and dump scams” now concentrate on social media platforms and use ever-more-elaborate strategies to convince victims to join. According to the SFC, they have occasionally used popular market pundits and well-known investment advisors as faces to lure victims into the scam.

Although there are numerous variations of these strategies, the watchdog claimed that certain advertisements make use of fictitious research studies and forecast precise target values for a stock of a company.

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