Four face jail time over ‘pump and dump’ scam on messaging app

Four people face jail time after being criminally charged with operating a “pump and dump” scheme on encrypted messaging app Telegram.

“Pump and dump” schemes involve co-ordinated moves by groups of investors to push up the value of a stock higher before dumping the shares en masse for a profit.

Syed Yusuf (right) outside Downing Centre Local Court on Tuesday. He is one of four people charged by ASIC with market manipulation.Credit: Dion Georgopoulos

Syed Yusuf, Larissa Quinlan, Emma Summer and Kurt Stuart were charged in Sydney’s Downing Centre Local Court with conspiracy to commit market rigging and false trading to artificially increase the price of shares listed on the Australian Securities Exchange (ASX) before dumping them.

If found guilty, they face a maximum penalty of 15 years’ imprisonment and a fine of over $1 million for market manipulation.

ASIC alleges that the defendants formed a private group on Telegram where they discussed and selected penny stocks they would announce to the public Telegram group named the “ASX Pump and Dump Group” to entice other market participants to join in.

This masthead has previously revealed the public group, which had more than 12,000 members, was behind the pump and dump of Aura Energy on September 23, 2021. That group has since closed.

The defendants have also been charged with dealing with the proceeds of crime in relation to the money that they each obtained from the pump and dump activity.

“Market manipulation is illegal. 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,” ASIC chairman Joe Longo said in a statement on Tuesday.

“ASIC monitors the cleanliness of our markets, and we take decisive action to disrupt activities that may impact cleanliness. 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. Co-ordinated attempts to manipulate the market is a criminal offence.”

The matter first came to light when ASIC warned the markets of a spike in pump and dump activity after the Aura Energy incident.

On that day in 2021, a Telegram group focused on ASX pump and dumps nominated Aura Energy as its target. By 10am the stock had opened 7800 per cent higher at 33¢, 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¢ a share. It closed at 26¢.

The matter is being prosecuted by the Commonwealth Director of Public Prosecutions after a referral from ASIC in December 2022.

The matter was adjourned to July 30 in the Downing Centre Local Court for a detention application to be made in respect to each of the defendants.

ASIC will on Wednesday announce it is establishing a specialised team to deal with insider trading investigations, which the regulator says will increase the number of criminal briefs it refers to the Commonwealth Director Public Prosecutions.

ASIC will also release a report that says Australia’s equity markets are among the “cleanest” in the world when it comes to the amount of abnormal trading. The report also says the percentage of mergers and acquisitions that have leaked in Australia is lower than in other countries.

ASIC chair Joe Longo said protecting and lifting the integrity of the equity markets was a priority for the regulator.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.