ASIC Joins Telegram Groups to Warn Investors Against Pump-and-Dump Schemes

Due to the increasing activity of pump-and-dump campaigns coordinated over social media and instant messaging platforms, the Australian Securities & Investments Commission (ASIC) has started monitoring platforms to step in as an early warning system to respond to these schemes.

Last week, a 288-member group of Australian “small investors” got the shock of a lifetime when they received a message from ASIC on a private Telegram group.

The independent government regulator somehow infiltrated the aptly titled “ASX Pump Organization” group’s private messages, involving potentially illegal market tip-offs.

SIC Steps Up 'Consumer Protection' by Warning Users in Private Telegram Groups Against Pump and Dump Schemes. pic.twitter.com/bcdQCr1uGQ

— Crypto News 🇦🇺 (@cryptonews_aus) October 17, 2021

Pumping and dumping refers to an individual or group that buys shares and then hypes the transaction to other prospective buyers, causing the stock’s price to skyrocket. This is done so they can sell their original shares for a profit.

Members of “ASX Pump Organization” tried to persuade others in the group to buy stocks in YPB Group, a NSW-based technology company.

ASIC Warns of Illegal Financial Activity

According to ASIC, there has been an increase in the number of Australians using social media forums, including Telegram, to coordinate pump-and-dump activities in the sharemarket. On September 23, ASIC published a warning about a “concerning trend” of social media groups engaging in “blatant” pump-and-dump campaigns.

ASIC has been working closely with market operators to identify and disrupt pump-and-dump campaigns, and we will continue to target actions that threaten the integrity of markets and to take enforcement action where appropriate.

Cathie Armour, ASIC commissioner

ASIC has previously warned that pumping and dumping can “amount to market manipulation”, which carries hefty penalties since it breaches the Corporations Act. The penalties for breaking this law can be a fine of more than A$1 million and up to 15 years in prison. Crypto trading is also still on the radar, with ASIC chairman Joe Longo stating that crypto trading is still a “significant area of concern”, especially for those using unlicensed crypto companies.

The campaign is not solely focused on crypto, according to an ASIC spokesperson, but instead “the campaign is targeting listed stocks, but the messaging is relevant for all financial products, including any crypto assets that may be, or involve, financial products”.

ASIC also knows who is behind every share bought and sold on the stock market and they have recently made it very clear that they are targeting these chat forums, as well social media finfluencers who talk about financial products including stocks.

Dale Gillham, chief analyst, Wealth Within

Pump and Dump Group’s Disbelief

Many of the group’s members assumed the account to be fake; however, ASIC confirmed the validity of the now-deleted message to The Australian newspaper.

Some members even stated that:

What ASIC needs to do is go after the corporates who inside-trade and short companies all the time, and not spend valuable time here hassling 300 small investors who are doing nothing wrong by sharing stock recommendations. This has to be the biggest joke in history,

ASX Pump Organisation group member

The increase in popularity and frequency of pump-and-dump schemes comes after the r/wallstreetbets and Robinhood saga in January, which saw a major pump and dump of GameStop (GME) and AMC Entertainment (AMC) shares.