Police Warns About ‘Pump and Dump’ Stock Buying Scam; Victims Have Been Scammed Over USD$1 Million

If someone texts you on WhatsApp saying they can make you filthy rich with an investment, what would you do?

1. Become suspicious of this complete stranger and block them
2. Hand your money over to them
3. Put on some music and do a little dance

While 1 is certainly the best option, number 3, though weird, isn’t bad either.

The last thing you should do, of course, is number 2, as you have no idea who this stranger is and whether they’re trustworthy.

But that’s unfortunately what seven people ended up doing recently, and they paid a huge price for it.

“Pump and Dump” Stock Buying Scam

Most of the victims were approached on WhatsApp or WeChat, and were told of a get-rich-quick method by purchasing shares in the US or Hong Kong stock exchanges.

Scammers used two different methods to gain the trust of the victims; the first was to use the picture of an attractive woman in a one-on-one conversation, and the other was to invite several victims at once into a group chat.

Once that was done, the modus operandi was essentially the same.

The scammers would claim to have insider information or be an expert on overseas listed companies, promising quick profits.

In some instances, the scammers initially offered stock recommendations which paid off to gain their trust.

Then, the victims would be asked to purchase shares of a “high quality” company whose shares price would supposedly spike in the near future.

Once they did so, however, the scammers would quickly sell their shares to make a profit.

This is called a “pump and dump” scam, which is a manipulative scheme that attempts to inflate the price of a stock or security through fake recommendations.

When the victims purchase shares named by the scammers, the price of the share goes up, thanks to the law of supply and demand. This is called a “pump”

And once this price has been artificially boosted, scammers would quickly sell all their shares to make a profit, which is referred to as a  “dump”.

Of course, this dump would cause the share price to plummet, resulting in huge losses for the victims.

7 Victims Lost S$1.46 Million in 2 Days

In this case, the price of the stock bought by the seven victims fell by almost 80% in just 48 hours.

As a result, the victims lost a combined total of US$1.07 million (S$1.46 million).

Interestingly, the victims were always asked to send a screenshot of their transactions on their trading accounts as a purported “proof of purchase”.

In reality, it’s believed that the scammers were being paid by masterminds who had devised the scam and paid fraudsters based on the number of people they had swindled.

The police warned the public to be wary of such scams, and to be particularly sceptical of recommendations to buy overseas-listed shares with:

• low liquidity
• small market capitalisation
• high shareholding concentration

As the police said, “there is no such thing as a guaranteed investment or trading strategy.”

In other words, if something appears too good to be true, it probably is.

If you’re wondering why such online scams always work, watch this video to the end:

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Featured Image: SPF