A joint operation by the Hong Kong Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC) has resulted in the arrest of eight people. The operation targets a sophisticated syndicate operating ramp-and-dump schemes through a complex cross-shareholding network of Hong Kong-listed companies involving illicit gains of $191 million.

The arrestees include key members of the syndicate including the chairperson of a Hong Kong-listed company and three responsible officers of two brokers.

More than 120 SFC officers and 70 ICAC officers participated in the joint operation during which a total of 50 premises were searched including over 20 jointly searched by the SFC and the ICAC. The premises covered by search warrants obtained by the SFC and the ICAC included offices of certain Hong Kong-listed companies and SFC-licensed brokers.

The SFC conducted the search in relation to suspected ramp-and-dump schemes involving the stocks of six Hong Kong-listed companies and other market misconduct under the Securities and Futures Ordinance (SFO). The ICAC conducted the search and made the arrests for suspected corruption offences under the Prevention of Bribery Ordinance.

The joint operation was the result of the SFC’s initial discovery of suspicious trading activities of the syndicate in intensive investigations and referral of the case to the ICAC because of suspected corruption offences in addition to specific market misconduct offences under the SFO. The syndicate is suspected to have offered bribes to the responsible officers and staff members of brokers for providing assistance in share placing so as to facilitate the ramp-and-dump schemes.

Ramp-and-dump scheme is a form of market manipulation where fraudsters use different means to “ramp” up the share price of a listed company and then “dump” the shares to other investors at an artificially high price. The fraudsters also used social media platform to lure the unsuspecting investors to buy the shares at an artificially high price while the syndicate members were offloading for profit leaving innocent victims with substantial financial losses.