Pump-and-Dump Scam Gets New Twist
Taking a page from those who for decades ran South Florida boiler rooms and call centers to fleece would-be investors, scamsters are increasingly moving to lure victims through social media ads that connect them to chat groups.
The Plot
The plot is familiar: get investors to buy inflated stocks in a way that artificially pumps up the price – then sell them at a huge profit. It’s called pump-and-dump, or ramp-and-dump, or pig-butchering, but to its victims, it’s just a cruel scam.
How it Works
It starts with bogus online advertisements featuring purloined images of well-known successful investors, promising to share their expertise to help others profit as well. One such Facebook ad – falsely claiming to be from a hedge fund billionaire – pitched returns as high as "a staggering 45% … in just one month."
The Scamsters’ Tactics
Victims are lured into a WhatsApp group where hustlers on the other end – using what victims believe are aliases and fake photos – start to reel them in. After monitoring the comments in the group of the "investor assistant" named “Ava” for weeks, Mark Dimmer, a London medical delivery driver, said, “I thought she knew what they were talking about. And then she asked me about my life and the money I’m willing to invest and how much I’ve invested before.”
The Con
At first, victims are given free tips to well-traded US stocks and bought them through their own legitimate online brokerage accounts. But the tips eventually shifted to companies on the legitimate Hong Kong exchange. Then came the hard sell. “They had very strong information that this was going to be a successful investment and at that point the return was really going to be a 5 to 10-day play for about maybe a 20- to 30% gain,” Bourget recalled.
The Dump
Adding to the implied inside information, sometimes about an impending merger, was a sense of urgency. “So you got money in one stock already and then they’re pumping you for the other stock,” said Bourget. “And then right around Christmas, which is when this happened, both those stocks dropped 95% overnight. Boom.” “That’s a pump-and-dump,” said Collin Connors, cyber and crypto security consultant for ERMProtect in Coral Gables. “And that dump will happen in the blink of an eye.”
Recovery for Victims
Recovery for victims can be difficult, but it is possible, said Rosario Mendez, an FTC attorney. "We always try to get money back and when we do get money back, we give it back to the consumers that were affected by the scam." But better, she added, to avoid red flags, including, in this case, "the fact they transferred to another platform to communicate in a different way." Another, she added, is when they claim, "they can teach you something no one else can teach you, that they have a secret for investment to help you invest the money that way."
Conclusion
The Federal Trade Commission this month confirmed that much, finding a record $10 billion in consumer losses in 2023, a 14% increase in one year. And when it comes to the amount of money lost, investment scams topped the list at more than $4.6 billion—up from $1.7 billion in 2021.
Frequently Asked Questions
Q: How do I avoid becoming a victim of the pump-and-dump scam?
A: Don’t respond to unsolicited investment offers, including ads on social media, or discuss finances with people met online. Avoid promises of big returns coupled with the urgency to invest quickly.
Q: How can I recover from the scam?
A: Recovery for victims can be difficult, but it is possible. Avoid red flags, including the fact that the scamsters transferred to another platform to communicate in a different way. Also, be cautious of claims that they can teach you something no one else can teach you, that they have a secret for investment to help you invest the money that way.
Q: Who can I report the scam to?
A: Report the scam to the Federal Trade Commission (FTC) and your local law enforcement agency.
