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Police Advisory: Pump And Dump Scams Involving Hong Kong Listed Companies

by May 4, 2019 Health

The Commercial Affairs Department (CAD) have received complaints relating to suspected pump and dump scams involving companies listed on the Hong Kong Stock Exchange. A pump and dump scam is a form of stock market manipulation where fraudsters artificially inflate the price of a share (pumping), before selling their own shares once the price goes up (dumping). The fraudsters pump up the share price using a variety of methods, including spreading favourable but fake news about the company or creating false impression of trading activity in order to induce victims to trade in the company’s shares.

Victims were typically approached by scammers claiming to be from China or Hong Kong on social media platforms such as WeChat or LinkedIn. These scammers would then patiently work their way to gain the victims’ trust by texting them frequently on the pretext of friendship or networking purposes. Once trust had been established, the scammers would share that they possessed insider information on certain companies listed on the Hong Kong Stock Exchange. They would then encourage victims to buy these shares on the promise of quick and guaranteed profits.

Soon after the victims had bought their shares, the share prices of these companies would plunge sharply and the victims incur huge financial losses. In one case, the share price fell by more than 85% just hours after a victim bought the shares and the victim suffered trading losses of more than S$200,000.

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

Source: Singapore Police Force