These days, it is not unusual to find ourselves spending more and more time online and on various social media platforms. Social media has become one of the primary sources to stay on top of the news and to keep in touch with friends. You might have a lot of “friends” on social media, but do you really know all of them well? With the overflowing amount of information on social media, have you ever thought that some of the information might not be legitimate?

Social media has become a platform for scammers to operate their “ramp and dump” schemes in recent years. Stocks involved in these schemes are relatively low in liquidity and market capitalisation. Scammers will buy these stocks in advance at a low price. While the stock price is going up gradually, scammers will induce people on social media to buy the stock with an aim to ramp up the demand of the stock and further inflate the share price. Fraudsters will then dump the stock at an artificially high price and earn a huge profit.

Be suspicious when you hear of such investment pitches and question the credibility of the information and its source. Here are some common social media investment tactics involving “ramp and dump” schemes to be wary of.

Case example 1: Invitations to stock trading groups

There are many social media groups operating under the premise of stock investment and learning of stock trading which allow investors to exchange views and information. However, those stock trading or learning groups run by fraudsters are not for the purpose of exchanging stock trading views between investors, but to carry out their “ramp and dump” schemes. In order to attract more followers, some scammers impersonate themselves as celebrities such as renowned investment experts and key opinion leaders when they set up such investment groups.

In these groups, fraudsters will actively provide market insights and stock recommendations. To lower the guard of their potential victims, fraudsters will recommend some conservative and popular stocks at the onset. Yet “ramping and dumping” is their ultimate goal. They will eventually recommend stocks which can be manipulated easily, such as penny stocks with high shareholding concentrations and low liquidity.

To lend credibility, fraudsters will claim that their recommendations are based on exclusive tips from experts, or even inside information. Also, fraudsters will typically ask the investors to provide proof of their stock trading transactions in the form of a screenshot, which will then be forwarded to the mastermind behind the scheme to earn their commission. Finally, scammers will dump the stocks and the stock price will collapse resulting in significant losses for investors who bought the stock at inflated prices.

Remember that there is no such thing as easy money. Do not believe in investment tips with high guaranteed returns or inside information; always ask yourself why a stranger would offer you such tips or information.

Case example 2: When scammers meet victims

While many of us use social media to network and expand our circle of friends, fraudsters have a different purpose in mind. In order to be more credible or likable, fraudsters will often disguise themselves as highly educated professionals and / or attractive men or women to fool their targets. Once potential targets are identified, fraudsters will befriend the targets with sweet talk and claim that they have stock tips from an expert, or even an insider, to persuade the targets into buying stocks offloaded by the fraudsters at artificially high prices.

Remember that fate does not bring a fraudster into your life, it is all part of the scam devised by the fraudster.

Here are some ways to avoid investment scams.

  • Don’t trust so easily

    It is hard to tell the truth from lies in the virtual world. As such, be wary of unsolicited offers. If you see claims on social media about stock tips with guaranteed profits or inside information, stay vigilant. Even if the investment advice comes from your relatives, do not blindly follow them as your relatives may have fallen victims to the investment scams already.

  • Ask questions

    Fraudsters will disguise themselves to gain your trust. They may even disguise themselves as licensed persons to offer stock trading recommendations. As such, checking the licensing or registration records is not enough, we have to take further steps to verify the identity of those who makes stock trading recommendations on social media.

  • Stay informed

    The more you know, the less likely you will become the next victim. Stay on top of news relating to scams. You may also refer to the Anti-Deception Coordination Center (ADDC) for the latest scam information and alerts.

  • Greed knows no bounds

    Greed is a very common reason for someone becoming the victim of a scam. Just remember that there is no such thing as low risk investments with high guaranteed returns – these are simply false claims made by the fraudsters to catch you. Fraudsters will use your fear of missing an opportunity against you.


21 Sep 2020