Re: Beware of being caught up in a ramp and dump scam

Dear Valued Customers and Investors:

As an increasing number of retail investors have fallen victims to ramp and dump scams conducted through popular social media platforms, please be reminded to stay vigilant and avoid being deceived.

A ramp and dump scam is a form of stock market manipulation. Market manipulative activities or transactions may be regarded as “market misconduct” under Parts XIII and XIV of the SFO, subject to maximum penalties of 10 years’ imprisonment and a fine of $10 million, as well as other sanctions.

In the ramp and dump scams, the fraudsters “ramp” up the share price of a listed company through false and misleading statements and then “dump” the shares to other investors at an artificially high price in order to earn a huge profit.  Fraudsters usually use social media to as a platform to operate their “ramp and dump” schemes.

Some of these schemes were orchestrated at an early stage in the IPO process with the aim of later manipulating the share price. Following an initial surge after listing, the share price often fell well below the IPO price, causing substantial losses for many investors, and afterwards trading turnover usually shrank to a negligible level.

Here are some hints to avoid investment scams.

1.    Be skeptical and don’t trust so easily

Stay alert especially if someone claims to be an investment advisor or celebrity and he has any stock tips with guaranteed profits or inside information. Even if the investment advice comes from your relatives, do not blindly follow them because your relatives may have already fallen victims to the investment scams.

2.    Pay attention to warning signs

Pay attention to any news relating to scams. If your online “friend” offers investment advice to you, the share price increases substantially without any positive news, small cap stock with lows liquidity has high shareholding concentration, your online “friend” asks you to share a screenshot of your trading record with him, you should stay alert.

3.    Do your own analysis

Usually, the stock recommended by the fraudster is overvalued and there is no justification for the share price to surge. Fraudsters can easily disguise themselves as licensed persons to offer stock trading recommendations. Thus, investor should do his homework, verify the identifies of those who makes stock trading recommendation or seek independent advice from his licensed investment manager before making any investment decision.

4.    Conquer your greed

Greed is one of the common reasons that these types of scams are successful. Fraudsters will manipulate your fear of missing an opportunity against you. Please remember that investments always involve risk, and there is no such thing as a low risk investment with high guaranteed returns.

For details, please visit:

https://www.sfc.hk/-/media/EN/files/ER/Reports/Enforcement-Reporter/SFC-Enforcement-Reporter_Sep2020_EN.pdf

https://www.ifec.org.hk/web/en/moneyessentials/scams/closer-look-investment-scams.page.

Thanks for your attention.