The country’s financial markets regulator is warning people about a “pump and dump” scam after receiving a number of complaints with multiple victims losing significant amounts of money.
And these complaints are likely only the tip of the iceberg, says John Horner, the Financial Markets Authority (FMA) director of markets, investment and reporting.
“Because these impersonation pump and dump scams play out over days and weeks, it’s possible there are others happening in New Zealand right now, with the scammers potentially pivoting to another company’s shares.”
“This current scam uses social media scam advertisements featuring an impersonated business leader, encouraging investors to join a fake investor chat group," Horner says.
The FMA initially raised concerns about the impersonations in a public warning in August.
Since then, it has "received further information showing the scam is part of a global network of scams aimed at market manipulation", Horner says.
What is a pump and dump scam?
This type of scam is when a person buys shares in a company and starts an organised campaign to increase the share price, the FMA says. That’s the ‘pump’ aspect of the scam.
“They then sell (or ‘dump’) their shares and make a profit, while the other shareholders suffer financial losses as the share price falls.”
People running these scams use social media platforms and online forums, the FMA says, “to create a sense of excitement about buying a company’s shares by spreading false information about the company’s prospects”.
“This excitement and interest artificially drives the share price up as they lure investors. This is considered a form of market manipulation.”
The FMA says the scam uses Facebook and Instagram ads, impersonating well-known New Zealand business leaders to target investors.
These investors are then invited to join a group chat on platforms like WhatsApp.
“There, they are encouraged to use reputable trading platforms to buy low-value shares in companies listed on overseas exchanges, to artificially inflate the share price.
“The scammers sell their own shares at the inflated price and, when the price later drops, the victims are left bearing the loss,” the FMA says.
The scammers then tell victims they’re entitled to compensation or reimbursement, the FMA says, with the scammers then collecting personal details and further payments from the victims.
Some scam investment advice group chats the FMA has so far discovered are:
- 276The Stock Investment Elite Wealth Group 1 on WhatsApp
- Investment Navigation Group 1 on WhatsApp
- Stock Market Tracking group Z1 on WhatsApp with the phone number +1 (314) 665-7424
- Stock Market Trends 51 on WhatsApp with phone numbers +1 (856) 500-8420 and +1 (504) 657-6110
- Stockmarket navigation group302 on WhatsApp with phone numbers +1 (504) 261-9422 and +1 (808) 216-7031
- US Stocks Investment Group-672 on WhatsApp
Fictional investment advisers also discovered by the FMA so far are:
- Amy Mills on +1 (681) 427-8556
- David Greene (imposter)
- Jane Share Guru
- Laura Marcuzzi (imposter) on +44 7563 754111
- Nicole Vera (imposter) on +44 7731 897748
- Scott Horsburgh (imposter) on +1 (217) 862-4364
There are similar scams operating overseas with the FBI recently issuing a warning.
The FMA will be sharing case details with relevant overseas financial regulators as some of the pumped shares are listed on a US exchange (NASDAQ) and some of the pumped companies are based in China.
The regulator says it has also alerted banks and businesses being impersonated.
‘We urge extreme caution’
Horner says any suspicious activity should be reported to the social media channel, to the company involved and to the FMA.
The FMA encourages New Zealanders to take extra care when thinking about investment decisions and seeking out investment advice, Horner says.
“If an organisation is offering investment tips through social media, be cautious.”
“We urge extreme caution to investors impacted by this or other scams which may include ‘opportunities’ to trade out of this position or support to recover funds lost, these are also likely to be scams,” Horner says.
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