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Fifteen brokers in Hong Kong have been ordered to freeze client accounts linked to a suspected social media ramp-and-dump scam.

The Securities and Futures Commission (SFC) of Hong Kong has shut down several market manipulation schemes in the Chinese territory, leading to trading accounts being frozen and a series of arrests. 

It said 15 brokers in Hong Kong have been ordered to freeze client accounts linked to a suspected social media ramp-and-dump scam, prohibiting them from dealing with or processing certain assets held in 32 trading accounts. 

The SFC said in a statement on March 15 that the restrictions related to manipulating the market in the shares of a company listed on the Hong Kong Stock Exchange between November 2019 and November 2020. 

The 15 brokerages cannot, without the SFC’s prior written consent, deal in or transfer the assets or assist in their disposal in the affected accounts up to a certain amount. The regulator said the restrictions were being made in the public interest. 

The announcement follows an earlier one on March 5, when the SFC said it had worked with the police to bust a sophisticated market manipulation ring, which left investors nursing losses.

The SFC is determined to eliminate these ramp-and-dump schemes which cause harm and distress to those members of the public who are duped by fraudsters 

Ashley Alder, Hong Kong SFC

The SFC said 12 people – including those believed to be the ringleaders of the syndicate and their associates – were arrested during a joint search of 27 premises across Hong Kong by more than 160 officers of the SFC and the police.

Ahead of the operation, the SFC issued 16 restriction notices and froze 63 securities accounts, which it believes hold proceeds of the ramp-and-dump schemes belonging to syndicate members. Overall the amount of assets frozen total about HK$860m ($110m).

“The SFC is determined to eliminate these ramp-and-dump schemes, which cause harm and distress to those members of the public who are duped by fraudsters. In doing so we will not hesitate to use all the enforcement and supervisory tools at our disposal, as well as working closely with the police,” said Ashley Alder, the SFC’s CEO.  

“Our joint operation underscores our shared commitment to eradicate serious misconduct to protect the public and maintain the integrity of our market.” 

Typical targets for fraudsters are shares of small listed companies with low prices and thin trading volumes making their values easier to manipulate with relatively modest sums of money. Mr Ashley added that cracking down on such schemes is a top enforcement priority for the SFC this year.

This article first appeared in The Banker’s sister publication Global Risk Regulator.

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