Last week, The Bear Cave investigative financial newsletter warned of widespread pump-and-dump scams coordinated via WhatsApp groups and fake investment firms that target U.S.-listed Chinese stocks.
- PTHL stock is dropping. Track live prices here.
The Scheme
The Bear Cave claimed that the scammers first build trust with legitimate stock tips and promise quick profits before steering victims into obscure micro-cap stocks, often leveraging false rumors of major partnerships.
When the targeted stocks peak, the promoters suddenly sell, triggering stock crashes and leaving investors with large losses.
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How It Works:
The schemes use elaborate tactics like fake websites, branded merchandise and impersonation of financial professionals to seem credible, according to The Bear Cave.
WhatsApp is the main platform, and the fraudsters cycle victims through stages: building trust, extracting investment, engineering stock collapse and then starting over.
The scams operate on a massive scale, with hundreds of groups on social media making regulatory action difficult.
At the end of July, The Bear Cave released a report on Chinese health care company Pheton Holdings Ltd. (NASDAQ:PTHL) warning that overseas groups appeared to be manipulating the stock price by promoting a "potential" tie-up between Pheton and Gilead.
"These unsubstantiated rumors match a familiar pattern in which overseas stock scammers promote tightly held U.S.-listed Chinese companies on the basis of spurious M&A rumors, only for them to later experience sudden intraday stock collapses, often falling 90% or more," The Bear Cave wrote in the report.
What Stocks Could Be Next?
The Bear Cave pointed to six stocks that could be targeted by the pump-and-dump scheme in the near future. They are:
- Mint Incorporation Limited (NASDAQ:MIMI)
- Epsium Enterprise Limited (NASDAQ:EPSM)
- QMMM Holdings Limited (NASDAQ:QMMM)
- Star Fashion Culture Holdings Limited (NASDAQ:STFS)
- Fly-E Group, Inc. (NASDAQ:FLYE)
- Cuprina Holdings Ltd. (NASDAQ:CUPR)
The Bear Cave has launched a website, StopNasdaqChinaFraud.com, to crowdsource evidence and aid with investigations against the alleged perpetrators.
Investors should be wary: sudden surges in little-known Chinese stocks being promoted on WhatsApp and other social media are a major red flag for pump-and-dump fraud.
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