ASIC issues stern warning about social media pump and dump posts

The corporate watchdog has issued a stern warning to companies, brokers and traders about social media users coordinating illegal pump and dump activities in listed stocks to pocket big profits.

The Australian Securities and Investments Commission said on Thursday it had seen a spike in so-called pump and dump activity in recent times, and there was an onus on brokers to file suspicious activity reports if they detected such activity. Companies were also expected to report any unusual trading, ASIC said.

Twitter was awash on Thursday before the market opened with heavily promotional posts of Aura Energy, a small uranium prospector that was spruiked to become the next big thing, posting a strong rise in its share price. A Telegram group focused on ASX pump and dumps also nominated Aura Energy as its target for the day. By 10am the stock had opened up 7800 per cent at 33 cents, having recently traded at .03 of a cent before a 13 for 1 share consolidation that should’ve pumped up its price to 4 or 5 cents a share. It closed at 26 cents.

ASIC is homing in on suspicious trading activity. Credit: Jim Rice

The Age and The Sydney Morning Herald are not implying the company was aware it would be targeted in such a way, or that it has engaged in any inappropriate conduct. Aura Energy has been contacted for comment.

Ramping a stock because it’s in a popular business like uranium is not necessarily illegal. What starts to raise alarm bells is when the stock that charts a stratospheric rise suddenly crashes back, as though it has been pumped up and then dumped by holders.

A screenshot of the ASX pump and dump group on Telegram lining up ASX-listed group Aura Energy for a price jump.

“ASIC has recently observed blatant attempts to pump share prices, using posts on social media to announce a target stock, a designated time to buy and a target price or percentage gain to be reached before dumping the shares,” the regulator said in a statement on Thursday morning before the start of trading.

“In some cases, posts on social media forums may mislead subscribers by suggesting the activity is legal”.

ASIC regularly observes social media activity that discusses market tips and stock ideas on various platforms like Telegram, Reddit, Twitter and Facebook. The group on messaging app Telegram even explicitly describes itself as an ASX pump and dump group.

ASIC commissioner Cathie Armour said the regulator would take enforcement action where appropriate.
“ASIC has been working closely with market operators to identify and disrupt pump and dump campaigns, and we will continue to target actions that threaten the integrity of markets.”

Ms Armour also pushed back on brokers to set up systems to look out for groups of clients who trade in the same stocks in the same direction at the same time.

“Market participants, as gatekeepers, should take active steps to identify and stop potential market misconduct. They should consider the circumstances of all orders that enter a market through their systems, and be aware of indicators of manipulative trading,” Ms Armour said.

“ASIC expects participants to promptly submit suspicious activity reports where they see this type of activity. ”

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