Hong Kong busts perpetrators of ‘ramp and dump’ scam

abdelaziz Fathi

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Local brokers were also prohibited from processing assets held in trading accounts related to five persons, who were possibly involved in a social media ramp-and-dump scam. The SFC added that the fraudulent scheme targeted the shares of two publicly-listed companies between October 2018 and May 2019. Among them, two face additional charges of money laundering together with eight other defendants.

Additionally, the brokers are required to notify the SFC if they receive such instructions from their blocked clients.

“ The alleged syndicate members organised and executed “ramp-and-dump” schemes in the shares of two Hong Kong-listed companies (target stocks) by using different social media platforms and manipulated the trading of a large volume of those shares through the use of a substantial number of nominee accounts.  In implementing the schemes, the syndicate members were alleged to have committed offences involving market manipulation and money laundering,” the statement reads.

The HK watchdog did identify who it suspects to have committed this market misconduct, and highlighted that they have conspired with others to use multiple nominee accounts “to corner the shares of the target stocks” and drive their prices up.

At a later stage, the scam was alleged to induce investors to purchase those shares through different social media platforms.  The defendants then disposed their shares aggressively at a profit just as the price collapsed once the demand vanished.

The SFC said the profile of financial fraud is changing as more people are being targeted online, moving away from the traditional cold call. Fraudsters are now contacting people through a range of popular social media sites, such as Facebook, Instagram, WeChat, Whatsapp, Telegram and even online dating platforms.

Fraudsters try to capitalize on fear

Moreover, the regulator urged investors to be vigilant when offered ‘inside information’ or investment tips online, particularly when strangers on social media promote small cap or less liquid stocks. Additionally, it revealed that more and more Hong Kong small-cap companies have come under the attack of pump-and-dump scams this year.

According to the SFC data, 20% of the market manipulation cases it is currently investigating fall under these kinds of fraudulent schemes that attempt to boost or decrease the price of a stock through recommendations based on false or misleading tips.

The perpetrators of so-called ‘ramp and dump scams‘ now focus on social media channels and employ increasingly sophisticated tactics to persuade victims to join. Sometimes, they have impersonated famous investment advisors and popular market commentators to draw victims into the scheme, the SFC said.

While there are many variations of these tactics, the watchdog said that some promotions use purported research reports and predict specific target prices in a company’s stock.

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”

<