Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has established its official Facebook page with a campaign warning of a new generation of investment scams that are using flashy social media profiles.
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.
The watchdog 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 watchdog said.
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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.
Fraudsters Try to Capitalize on Fear
“Cracking down on organised investment fraud on online platforms is a high priority. To avoid falling victim to these scams, the public must be vigilant when offered unsolicited investment advice or tips on social media,” said Ashley Alder, the SFC’s Chief Executive Officer.
While these bogus profiles advertise get-rich-quick schemes, they do not even have a website and operate solely on social media channels. However, these scammers do not have the necessary accreditation or qualifications to offer these services.
Earlier in March, the watchdog warned that fraudsters are taking advantage of the coronavirus scare, and some of their scams are a direct threat to local investors. Moreover, the SFC said that there are hackers in the background, trying to take advantage of trending topics in the news.
Furthermore, the regulator warns of the substantial potential for fraud at this time, saying that crooks often try to capitalize on high-profile news events to lure investors into financial cons.