Singapore Exchange Issues Alert on Stocks Trading Scam in Chat Groups
14th December 2020 | Singapore
Singapore Exchange Regulation (SGX RegCo), the regulatory and governance subsidiary of Singapore Exchange (SGX), has issued an alert to the public on possible stocks trading scam in chat groups such as Telegram. The wrongdoer would engage in “Pump and Dump” schemes, where they would generate interest in buying of a particular stock they own in the chat group, and sell the stocks once it goes up. The wrongdoer typically target at low-price and low-trading volume stocks.
” SGX issues alert on trading scam in chat groups “
Chat Group:” Pump & Dump Scheme “
For example, the wrongdoer will buy ABC shares and would provide information in group chats to encourage trading on ABC shares. To create more interest, different nicknames / alias may be created to participate in the conversation, and provide more information that ABC shares price will go up.
This will encourage others in the group chat to buy. The wrongdoer will subsequently sell the ABC shares.
Illustration (By SGX Regco)
| Step | Action |
| 1 | Wrongdoer(s) accumulate shares typically in a low-volume, low-price security. |
| 2 | Wrongdoer(s) may enter orders to sell the shares at a higher price. |
| 3 | Wrongdoer(s) will post messages in the Telegram chat indicating they are about to enter that security and that interest in the security is building up. |
| 4 | Most posts with encouraging messages are made by the wrongdoer(s) in relation to that security and their purported target price for exit. This purported target price is usually higher than the prices at which the wrongdoer(s) has actually queued to sell or intend to sell at. |
| 5 | Wrongdoer(s) make small purchases at higher prices and announce in the chat that interest in the security is building up and price is gaining momentum. |
| 6 | Wrongdoer(s) may use other aliases to post messages to indicate support for the original posts. |
| 7 | Price reaches the level at which they are queuing to sell or intend to sell and wrongdoer(s) will close the position with a profit and may move on to pump and dump another counter. |
Alert by SGX Regco
- Possible market misconduct activities that exploit Telegram chat groups or other channels for investment strategy
- Wrongdoers engage in “pump and dump” schemes by promoting interest in a security for their own benefit
- The wrongdoer may work alone or in groups, using chat channels such as Telegram.
- When more members of the chat group trade, the stock price will go up and the wrongdoer will sell all the stocks
- Information on investments and trades shared on social media, in particular by anonymous individuals, may not be credible.
- Investors should always conduct their own due diligence and research on any potential investments, instead of obtaining information on social media
SGX RegCo will refer potential wrongdoer(s) to the statutory authorities for investigation of breaches of the laws.
$11.7 million in Penalties, 9 Convicted for Market Misconduct
In the 2020 Monetary Authority of Singapore (MAS) Enforcement Report covering the period January 2019 to June 2020 (1.5 years), the central bank of Singapore imposed $11.7 million in civil penalties and secured criminal conviction on 9 individuals for market misconduct and related offences.
Singapore Exchange Regulation (SGX RegCo) Board
Founded in 2017, SGX RegCo Board is a subsidiary of Singapore Exchange (SGX) and is a non-profit group to undertake all governance and regulatory function of SGX to ensure integrity and stability of the markets and clearing houses operated by SGX.
SGX RegCo Leadership
- Professor Tan Cheng Han, Chairman and Profession of Law at National University of Singapore
- Tan Boon Gin, CEO and Chief Regulatory Officer of SGX
- Manage $20 million to $3 billion of assets
- Invest $3 million to $300 million
- Advise institutions, billionaires, UHNWs & HNWs
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