The Australian financial services regulator has issued a warning against “pump-and-dump” operators following the conviction of four individuals who used Telegram group chats to push up the share prices of Australian stocks before selling them at inflated prices.
Bust of a Pump-and-Dump Scheme
The four offenders have been sentenced to terms of imprisonment, to be served through intensive corrections orders (ICOs), and must also pay thousands of dollars in penalties. All pleaded guilty to conspiracy to commit market manipulation and dealing with the proceeds of crime.
Joe Longo, the Chairman of ASIC
“This group used social media to rig the market, artificially pump up penny stocks, then dump them for quick profits, leaving everyday investors to bear the losses,” said ASIC Chair Joe Longo.
The Australian Securities and Investments Commission (ASIC) also warned that pump-and-dump operators are increasingly targeting Australian investors ahead of the holiday period.
Scammers, including those involved in fraudulent activity, are using the identities of Australian celebrities to lure potential victims onto messaging apps.
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Regulators Are Concerned
Pump-and-dump schemes have become so widespread that they were a key topic of discussion among financial regulators from Australia, Asia, Europe and North America at a meeting in London last month, the Australian regulator said.
Amanda Zeller, Senior Executive Leader for Market Integrity at ASIC
The regulator added that these schemes are becoming more sophisticated, with criminal gangs increasingly involved.
Cybercriminals are also hacking brokerage accounts to place trades, exploiting regulatory gaps in cross-border trading, and running social media advertisements to attract potential traders.
“Pump-and-dump operators target small-cap stocks with low liquidity, which means that when misleading announcements or rumours are spread, they can have a large impact on share prices,” said ASIC’s Amanda Zeller, Senior Executive Leader for Market Integrity.
Other global counterparts of ASIC have also issued warnings and taken action against pump-and-dump schemes and their operators. New Zealand’s Financial Markets Authority (FMA), the United States’ Financial Industry Regulatory Authority (FINRA), and the Federal Bureau of Investigation (FBI) have all issued public warnings about such schemes.
