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Police Advisory On “Pump And Dump” Scams Involving Overseas Listed Companies

The Police have seen a resurgence in “pump and dump” scams involving overseas listed companies and would like to remind the public to remain vigilant and be wary of strangers offering stock recommendations or online chat groups discussing coordinated share purchases.

To recap[1], a pump and dump” scam is a form of stock market manipulation where fraudsters would artificially inflate the price of a company’s shares (“pumping”) by spreading false positive news about the company, or creating an appearance of trading activity in order to induce others to buy the shares. As the unwitting victims buy up the shares, the share price rises. The fraudsters then quickly sell their shares in the company while the share price goes up, then stop all activities. With the absence of manipulation, the share price then plunges, resulting in sharp losses for the victims.

A graphical representation of a suspected pump and dump scam is provided below.

20210811_police_advisory_on_pump_and_dump_scams_involving_overseas_listed_companies_1

[1] A police news release on pump and dump scams was previously issued on 4 May 2019. Singapore Exchange Regulation (SGX RegCo) also issued an advisory on 10 December 2020 while a joint advisory was issued by the Monetary Authority of Singapore and SGX RegCo on 2 February 2021. These earlier advisories can be accessed at:

- https://www.police.gov.sg/Media-Room/News/20190504_OTHERS_Police_Advisory_Pump_and_dump_scams_involving_Hong_Kong_listed_companies

- https://www.sgx.com/media-centre/20201210-sgx-regco-warns-public-pump-and-dump-activities-exploiting-telegram-chats-and

- https://www.mas.gov.sg/news/media-releases/2021/beware-of-risks-related-to-trading-incited-by-online-discussions

Based on reports received by the Police, most of those who fell prey to pump and dump scams had met the fraudsters online, through social media or instant messaging platforms such as WhatsApp and WeChat. In almost all instances, the victims were persuaded to purchase shares listed on either the Hong Kong or U.S. stock exchanges. The fraudsters usually employed one of the following two modus operandi (“MO”) to lure their victims into purchasing shares.

In the first MO, the fraudsters would use a photo of an attractive woman as the profile picture in their social media or instant messaging accounts, and initiate conversations with victims. Very often, there would be no mention of shares in the first few conversations.  Instead, they would patiently engage in one-to-one conversations with the chosen victims, and slowly work to gain the victims’ trust by texting frequently, on the pretext of wanting to know them better or for networking purposes. Once trust was established, the fraudsters would share that they possessed insider information on certain overseas listed companies and then encourage the victims to buy shares in these companies with the promise of quick profits.

In the second MO, the fraudsters would set up chat groups on instant messaging platforms and invite multiple victims into the chat groups. The fraudsters would identify themselves as investment gurus or shares trading experts and claim to have started the chat groups to share their insights of the stock market or to offer free advice on shares trading. To gain the victims’ trust, the fraudsters may first provide recommendations on certain shares which turn out to be correct. Once trust was established, the fraudsters would then “reveal” to their victims the name of a “high quality” company whose share price will purportedly increase significantly in the near future. The fraudsters would encourage all victims in the chat group to purchase the shares immediately once the company’s name was revealed.

In both MOs, the fraudsters would follow up by requesting the victims to send a screenshot of their trading account transactions to show that the victims had indeed purchased the shares recommended by the fraudsters. It is believed that the fraudsters operating these chats are remunerated by the masterminds based on the number of persons they had successfully persuaded to purchase shares, hence they needed the screenshots to claim their rewards.

In the most recent spate of cases, seven victims purchased more than 49,000 shares in an U.S. listed company based on the recommendation of an “expert”. Within two days, the share price plunged by almost 80% and the victims lost a total of more than USD1.07 million.

The public should keep in mind the following:

  • Be wary of stock tips provided to you online or by persons you have not personally met before. If you require financial advice, it is strongly encouraged that you deal with entities or persons regulated by the Monetary Authority of Singapore. The information is available on the MAS website, under the MAS’ Financial Institutions Directory and Register of Representatives.

  • Be especially sceptical of recommendations to purchase overseas listed shares with low liquidity, small market capitalisation or with high shareholding concentration. These shares are highly volatile and more susceptible to manipulation by fraudsters.
  • Do not be lulled into complacency just because you are purchasing actual shares listed on reputable exchanges. You may still suffer a loss arising from the fall in value of the shares. Not all scams or frauds require you to transfer money directly to the fraudsters.

  • Investments which promise high returns usually come with high risks. There is no such thing as a guaranteed investment or trading strategy. Do not be tempted by insider tips or promises of quick guaranteed returns. Always conduct your own due diligence before investing.

For more information on scams, members of the public can visit scamalert.sg or call the Anti-Scam Hotline at 1800-722-6688. Anyone with information on such scams may call the Police Hotline at 1800-255-0000 or submit information online at www.police.gov.sg/iwitness.

20210811_police_advisory_on_pump_and_dump_scams_involving_overseas_listed_companies_2

 


PUBLIC AFFAIRS DEPARTMENT
SINGAPORE POLICE FORCE
11 August 2021 @ 11:15 AM
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