As ASIC comes under increasing scrutiny over its effectiveness as a regulator, it has achived a timely win in court with charges laid against a small group of investors involved in a pump-and-dump scheme.
Syed Yusuf, Larissa Quinlan, Emma Summer and Kurt Stuart were charged with conspiracy to commit market rigging and false trading, to artificially increase the price of Australian shares before selling them.
This is colloquially known as a “pump-and-dump” scheme where investors attempt to pump up a stock on social media to generate interest from other investors, and make a profit by selling at a peak.
The quartet were charged in the Downing Centre Local Court and face a maximum penalty of 15 years’ imprisonment and a fine of more than $1 million for market manipulation. The matter has been adjourned to 30 July 2024.
The group organised the scheme via social media/messaging app Telegram in a publicly accessible group named the “ASX Pump and Dump Group”.
ASIC announced the charges in a media release, alleging that each of the defendants purchased some, but not all, of the stocks that they had conspired to announce to the members of the group.
The regulator first referred the case to prosecutors in December 2022 and since then the regulator has come under intense scrutiny from a review of its performance by Coalition Senator Andrew Bragg which criticised the regulator’s enforcement record, along with criticism from the advice profession for failure to act on misconduct in cases like Dixon Advisory.
ASIC announced in September 2021 it would crack down on the proprietors of pump-and-dump groups and those behind campaigns to artificially inflate stock prices.
Over three weeks during that month, ASIC said nine announcements were made to the ‘ASX Pump and Dump Group’ to boost selected stocks.
The regulator said the defendants allegedly purchased “some or all” of the stocks with the intention to drive the share price to an artificial target, and then sell.
In October 2021, ASIC warned traders in a Telegram share market chat room they may be breaking the law by seeking to organise stock price manipulation.
ASIC chair Joe Longo said upholding the integrity of our Australia’s financial markets is a priority for the regulator.
“Pump-and-dump schemes are a form of financial fraud, eroding investor wealth, threatening the integrity of our markets and potentially the Australian economy more broadly,” Longo said.
“ASIC monitors the cleanliness of our markets, and we take decisive action to disrupt activities that may impact cleanliness.”
Longo said co-ordinated attempts to manipulate the market is a criminal offence.
“This is why we took the action of entering social media forums and posting directly to issue warnings to members that their actions may be in breach of the law,” Longo said.
