SFC Freezes Brokerage Accounts Linked to Social Media Rip-off

One of the SFC’s top priorities for the year is tackling ramp and dump scams and other types of market manipulation carried out through social media.

The Hong Kong SFC (Securities and Futures Commission) issued restriction notices to Enlighten Securities and Futu Securities on Tuesday (February 9) prohibiting them from handling or processing certain assets in three trading accounts.

The accounts were linked to an alleged “ramp-and-dump” social media scam that manipulated the market into stocks of two publicly traded companies.

A social media ramp-and-dump scam is a form of stock market manipulation in which scammers “raise” the share price of a publicly traded company in various ways and then use social media platforms to induce investors to buy the shares they hold they are “dumping” at an artificially high price, the SFC said.

Brokers are required to notify the SFC when they receive instructions from persons authorized to trade for the trading accounts concerned.

“The SFC believes that releasing the restrictions is in the interest of the investing public or in the public interest,” the regulator said, adding that an investigation was ongoing.

The restrictions will appear as authorities investigate the increasing use of online discussion forums and social media chat groups by retail investors to coordinate stock trading.

Regulators, including the SFC, recently issued warnings advising investors to be more aware of the risks of trading securities triggered by such forums, which indicates high volatility in US stocks as indicated by GameStop, AMC Entertainment and BlackBerry.

Late last month, GameStop shares saw heightened volatility after Reddit-inspired retail investors drove the share price up despite hedge funds selling the stock short.

In response, trading platforms like Robinhood imposed restrictions to limit investment in the stocks after the clearinghouse requested an additional margin of up to $ 3 billion to accommodate the higher volatility.

On Wednesday (February 10), the SFC and HKPF (Hong Kong Police Force) jointly released a video warning the public to beware of online investment scams and scammers that investment groups set up on social media platforms claiming To offer stock market tips or inside information.

“One of our top priorities for the year is combating ramp and dump fraud and other types of market manipulation carried out through popular social media platforms,” ​​said Thomas Atkinson, Executive Director of Enforcement, SFC.

AMC Entertainment, BlackBerry, Brokerage, Clearinghouse, Enlighten Securities, Futu Securities, GameStop, HKPF, Margin, Market Manipulation, Ramp-and-Dump, Reddit, Robinhood, Fraud, SFC, Social Media, Thomas Atkinson, Volatility

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