Concerns grow over the increasing threat of investment fraud targeting retail investors. Addressing this issue on LinkedIn today (Monday), the CEO of Webull Securities (UK), Nick Saunders, highlighted that pump and dump schemes are becoming more complex and causing greater financial harm.

While the tactic is not new, he noted that recent versions involve more sophisticated methods, making them harder to identify and more damaging when they occur. “Over recent weeks, we've witnessed a disturbing evolution in pump and dump schemes,” Saunders wrote.

Enforcement Cases Highlight Problem Scope

Two enforcement cases highlight the scope of the problem. In 2016, the U.S. Securities and Exchange Commission sued a UK-based trader for hacking brokerage accounts and manipulating stock prices, causing losses of nearly $300,000.

More recently, four individuals in Australia pleaded guilty to coordinating a pump and dump scheme via Telegram, targeting penny stocks between August and September 2021. The group now faces potential prison sentences and million-dollar fines.

How Pump and Dump Schemes Work

Pump and dump schemes involve artificially inflating the price of a stock to attract buyers, before rapidly selling off the holdings to profit from the surge. Once the stock is dumped, its price collapses, often leaving late investors with heavy losses.

Changing Tactics in Fraud

Saunders said recent cases show a more advanced pattern of fraud. Criminals are reportedly using credentials stolen through phishing Phishing Phishing is a form of cyber-attack in which fake websites, emails, and text messages are used to elicit personal data. The most common targets in this assault are passwords, private cryptocurrency keys, and credit card details.Phishers disguise themselves as reputable businesses and other types of entities. In certain instances, reputable government organizations or authorities are impersonated in order to collect this data.Because phishing relies on psychological manipulation rather than techno Phishing is a form of cyber-attack in which fake websites, emails, and text messages are used to elicit personal data. The most common targets in this assault are passwords, private cryptocurrency keys, and credit card details.Phishers disguise themselves as reputable businesses and other types of entities. In certain instances, reputable government organizations or authorities are impersonated in order to collect this data.Because phishing relies on psychological manipulation rather than techno Read this Term attacks to access brokerage accounts.

They then target thinly traded Nasdaq-listed stocks, accumulating large positions without drawing attention. Once they control enough shares, they promote the stock on platforms like WhatsApp and other social media sites.

In these promotions, fraudsters pose as analysts claiming to have insider information. They push stories about upcoming medical approvals or company takeovers to build hype. As the stock price climbs—from, for example, $2 to $10—retail investors are drawn in, believing they are buying into a regulated and legitimate opportunity.

“Victims see ‘regulated’ stocks on legitimate exchanges and assume safety,” Saunders wrote. “But they don't realise the stock values themselves are entirely unsecured.” According to him: “When the dump happens, prices can fall 90% in seconds and life savings can vanish instantly.”

He said some investors have lost their life savings in recent weeks as a result of these schemes.

Calls for Stronger Regulatory Action

Saunders also criticised the current state of investor protection and awareness. He said traditional warnings and educational efforts have failed to prevent the spread of these scams. “The warnings are too niche, easily overlooked,” he said, adding that it can be extremely difficult to convince victims they are being misled.

He called on the Financial Conduct Authority (FCA) Financial Conduct Authority (FCA) The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol The Financial Conduct Authority (FCA) is the largest financial regulator for all financial markets in the United Kingdom (UK).The UK regulator is responsible for the conduct of firms authorized under the Financial Services and Markets Act 2000. Moreover, the FCA is also responsible for the regulation of behavior in retail and wholesale financial markets, supervision of the trading infrastructure that supports those markets, and the prudential regulation of firms not regulated by the PRA. Its rol Read this Term to take stronger action. He suggested that brokers should be allowed to block access to suspicious stocks without fear of backlash from users or the media. He also proposed the creation of a daily intelligence-sharing system between brokers and regulators to support faster responses and prevent harm.

“We’re committed to being part of the solution,” he said of Webull UK’s stance, “but this requires industry-wide collaboration and regulatory support.” He concluded by asking the public for thoughts on further measures to protect retail investors.