The Securities and Exchange Commission of Pakistan (SECP) on Monday announced it had arrested a “self-styled stock market guru” who influenced public sentiment through social media and earned millions of rupees through a so-called ‘pump and dump’ scheme.
“In the wake of a sophisticated surveillance operation and a detailed investigation, the SECP has been able to unearth and act against a financial cybercrime. A self-styled stock market guru who gave self-serving investment tips to the public on Facebook has been caught red handed by the SECP,” the commission claimed in a press statement.
“Behaving like stock market gurus and making suggestions about investments are illegal. This is a form of manipulation called inducement, which is a crime under the Securities Act 2015,” an SECP official had announced late last month. SECP Spokesperson Shakil Chaudhary confirmed the arrest and said more arrests will be made in coming days in similar cases.
The SECP’s statement also shed light on the strategy of the accused: “His method of defrauding small investors was through a pump and dump strategy. He would buy a large quantity of shares of the company and then tell his Facebook followers that the financial prospects of the company had greatly improved. When his social media followers rushed to buy the stock, he would sell his own holdings.”
Pump and dump schemes usually entail an influential investor inflating the prospects of their investments in a bid to lure more people to invest their money in the same stocks. When stock prices rise as a result of the climbing demand, the manipulator dumps their stocks at the higher prices, walking away with a profit.