HK authorities crack down on ramp-and-dump syndicate
The Hong Kong Securities and Futures Commission (SFC) and the Police have conducted a joint operation 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 which nets them substantial profits whilst leaving innocent victims with substantial financial losses.
Twelve people – including those believed to be the ringleaders of the syndicate and their associates – were arrested yesterday during a joint search of 27 premises across Hong Kong by more than 160 officers of the SFC and the Police.
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, in addition to specific market misconduct offences under the Securities and Futures Ordinance.
Prior to the joint operation, the SFC issued 16 Restriction Notices and froze 63 securities accounts which it believes hold proceeds of the ramp and dump schemes belonging to syndicate members. Overall the amount of assets frozen total about $860 million.
The SFC’s investigation also highlighted that the entities used by the fraudsters to perpetrate ramp and dump schemes are typically small listed companies with a low share price coupled with very thin trading. These companies become targets for fraud as their shares are easier to corner and their share prices can be manipulated with relatively small cash outlays.
The regulator advises investors to stay vigilant and make informed investment decisions instead of relying on stock tips circulating in chat groups or on social media platforms.
The Hong Kong authorities have been active in their efforts to clamp down on ramp-and-dump scams. In February, for instance, the SFC issued restriction notices to 13 brokers over a suspected social media ramp-and-dump scam. The notices prohibit the brokers from dealing with or processing certain assets held in 54 trading accounts, which are related to a suspected social media ramp-and-dump scam involving the manipulation of the market in the shares of a company listed on The Stock Exchange of Hong Kong Limited between September 2020 and November 2020.