Suspected leader of ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Six senior executives of three listed companies, including star chef Wong Wing-chee, were among 13 people arrested as regulators cracked down on a “ramp and dump” scam. An arrest warrant was issued for Tam Siu Ki and he was subsequently placed on the list of “Have you seen these people?” on the SFC’s website.

In this scam, criminals made use of social media to call upon investors to buy or sell certain stocks by claiming they received exclusive tips from experts or even insiders. They induce unwary investors to buy shares at inflated prices, only to sell the shares at large profit margins, leaving victims with financial losses.

No pleas were made and he is now due to appear at the same court on 17 April 2023. “Tam was released on $1 million bail on the conditions that he must not leave Hong Kong; surrenders all travel documents and reports to police station on a regular basis,” the watchdog explains.

The SFC said the profile of financial fraud is changing as more people are being targeted online, moving away from the traditional cold call. Fraudsters are now contacting people through a range of popular social media sites, such as Facebook, Instagram, WeChat, Whatsapp, Telegram and even online dating platforms.

Fraudsters try to capitalize on fear

Moreover, the regulator urged investors to be vigilant when offered ‘inside information’ or investment tips online, particularly when strangers on social media promote small cap or less liquid stocks. Additionally, it revealed that more and more Hong Kong small-cap companies have come under the attack of pump-and-dump scams this year.

According to the SFC data, 20% of the market manipulation cases it is currently investigating fall under these kinds of fraudulent schemes that attempt to boost or decrease the price of a stock through recommendations based on false or misleading tips.

The perpetrators of so-called ‘ramp and dump scams‘ now focus on social media channels and employ increasingly sophisticated tactics to persuade victims to join. Sometimes, they have impersonated famous investment advisors and popular market commentators to draw victims into the scheme, the SFC said.

While there are many variations of these tactics, the watchdog said that some promotions use purported research reports and predict specific target prices in a company’s stock.