Hong Kong’s Securities and Futures Commission (SFC) and the police conducted a joint operation last week against an active and sophisticated syndicate suspected of operating ramp and dump manipulation schemes.
These schemes drive up the share prices of target stocks and then induce unwary investors via social media platforms to buy shares at artificially high prices. Syndicates then sell shares in a manner that nets them substantial profits whilst leaving victims with financial losses.
Twelve people, including those believed to be the ringleaders of the syndicate and their associates, were arrested on Thursday during a joint search of 27 premises across Hong Kong by around 160 officers of the SFC and the police, according to a statement from the securities regulator.
The operation followed a lengthy investigation by the SFC. The case was referred to the police because of the scale of suspected fraud and money laundering offences.
Before the joint operation, the SFC issued 16 restriction notices and froze 63 securities accounts holding HK$860m, which the regulator believes hold proceeds of the ramp and dump schemes belonging to syndicate members.
The regulator warned investors of the practice last year, urging them to be wary when offered investment tips online, particularly when strangers on social media small-cap or less liquid stocks. At the time, ramp and dump scams accounted for around 20% of the market manipulation cases under investigation by the SFC.
“The SFC is determined to eliminate these ramp and dump schemes which cause harm and distress to those members of the public or are duped by fraudsters,” Ashley Alder, SFC’s CEO, said in the statement.
“These schemes also underscore the importance of investor education. The SFC has been working closely with the police’s anti-deception coordination centre on a series of investor education campaign vents which are continuing,” Alder added.
Like the SFC, regulators in Singapore and Malaysia have warned investors about heeding investment advice from social media platforms.