ASIC Issues Urgent Warning as "Pump and Dump" Scams Resurge, Global Regulators on High Alert
- Joanna Lu
- 11 minutes ago
- 2 min read
ASIC issues urgent warning: "Pump and Dump" scams are surging—learn the 5 red flags to protect your investment.
Follow us on LinkedIn for the latest industry updates and trending news.
Following the holiday period and the start of the new year, the Australian Securities and Investments Commission (ASIC) has issued a media release, sending a stern warning to investors: so-called "Pump and Dump" schemes are surging. These schemes are becoming increasingly sophisticated, targeting retail investors not only in local Australian markets but also through overseas exchanges.
1. The Core Scam: Targeting Small-Cap Stocks
ASIC highlights that unscrupulous operators are launching coordinated attacks targeting retail investors during active market periods. These scammers artificially inflate (pump) the share prices of low-liquidity small-cap securities by spreading false rumours. Once the price peaks, the operators rapidly sell (dump) their shares for a quick profit, leaving unsuspecting investors who bought in later with significant losses.
2. Global Regulatory Response & Expert Insight
This phenomenon has triggered high alerts among global financial regulators. At a meeting held in London last month, regulators from Australia, Asia, Europe, and North America identified the rise of these schemes as a key topic of discussion.
ASIC’s Senior Executive Leader of Market Integrity noted that these schemes are becoming increasingly sophisticated. Scammers often zero in on low-liquidity stocks where misinformation can easily impact prices, luring in retail traders who are prone to "chasing the hype".
3. Five Warning Signs for Investors
ASIC has specifically outlined five common characteristics of these current scams for investors to watch out for:
Paid Advertising: Scammers are investing significant sums in advertisements on social media and search engines to secure top placement in search results and deceive potential investors.
Finfluencer Endorsements: Unscrupulous financial influencers spread misleading information or cite fake "inside information" to create artificial market hype.
Private Chat Groups: Social media advertisements direct investors to private chats on platforms like Telegram or WhatsApp where specific stocks are recommended.
Fake Celebrity Endorsements: Scammers use images of well-known identities in marketing materials to give false credibility to their message.
Unsolicited Marketing: Investors receive unsolicited emails or phone calls creating a false sense of urgency about a specific investment.
4. Enforcement Action
Four Sentenced in Sydney Alongside the warning, ASIC has demonstrated its commitment to enforcement. ASIC announced that four individuals who used Telegram groups to coordinate "pump and dump" schemes were recently sentenced in the Sydney District Court. This reinforces that the regulator is taking decisive action to protect market integrity.
5. Our Advice
We urge all investors to remain vigilant. Be skeptical of "get rich quick" opportunities and "hot tips" found on social media. Always verify the source of information through official channels before making any investment decisions.
Source of information: ASIC
Liability Limited By A Scheme Approved Under Professional Standards Legislation.
