2024-12-10 sec-litreleases pdf 1003 KB 7,717 chars

SEC v. BANISTER, No. 1:24-cv-09308 (Dec. 10, 2024)

raw: Social Media and Stock Tip Scams – Investor Alert

Social Media and Stock Tip Scams – Investor Alert, No. 1:24-cv-09308 (Dec. 10, 2024)

Caption: Securities and Exchange Commission v. Banister

summary

The SEC's Office of Investor Education and Advocacy issued an alert warning that fraudsters are using social media to impersonate professionals and execute stock manipulation scams.

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The SEC's Office of Investor Education and Advocacy released an alert regarding social media stock tip scams involving pump-and-dump, scalping, and touting schemes. These fraudulent activities target both microcap and major exchange-listed stocks through deceptive group chats and fake profiles. While the alert does not name specific defendants or dollar amounts, it warns of significant potential losses from promised high returns.

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The SEC’s Office of Investor Education and Advocacy has issued an investor alert regarding stock recommendation scams conducted via social media platforms. Fraudsters often impersonate registered investment professionals or famous industry figures to lure victims into group chats with promises of high, low-risk returns. These bad actors utilize market manipulation tactics, including pump-and-dump schemes, scalping, and undisclosed touting, to artificially influence share prices. The alert notes that these schemes are not limited to microcap stocks and can target companies on major U.S. exchanges. Investors are cautioned against making decisions based solely on social media ads or memes and are urged to verify credentials through Investor.gov. To prevent loss, the SEC recommends reporting any suspected impersonation or fraudulent activity directly to the agency.

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Scheme: pump-and-dump (95%)
Case No.: 1:24-cv-09308

Classified pump-and-dump(confidence 95%). EDGAR detection: forms S-8/S-1/424B/8-K· recall 69% / precision 12%. detection rule →

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agency Securities and Exchange Commission

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Securities And Exchange Commission warns investors that scams involving stock recommendations may be conducted through social media
Fraudsters impersonate registered brokers or investment advisers on social media
Fraudsters promise high investment returns with little or no risk
Fraudsters manipulate the share price of a company’s stock by spreading rumors
Investors should check the background of someone offering an investment using Investor.gov
Investors should verify that they are communicating with a licensed investment professional and not an imposter
Fraudsters advise investors to purchase shares of relatively smaller companies and send screenshots of purchases
Securities And Exchange Commission urges investors to work only with currently licensed or registered investment professionals or firms
Investors should report misrepresentation or impersonation of registered investment professionals to the SEC

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Social Media and Stock Tip Scams – Investor Alert · Source

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Social Media and Stock Tip Scams – Investor Alert
Sept. 30, 2024

The SEC’s Office of Investor Education and Advocacy (OIEA) warns investors that scams involving stock recommendations may be conducted through social media. Never make investment decisions based solely on information from social media platforms or apps.

Did you click on an advertisement online or on social media, and get added to a group chat focusing on investments?

Has someone contacted you through social media claiming they are a famous investment professional or an employee of a registered investment adviser or registered broker?

Have you been promised high investment returns with little or no risk?

If you experience any of these red flags, take the time to research and verify. Always check the background of someone offering you an investment and be aware that fraudsters may impersonate registered brokers or investment advisers on social media. You can use the free tool on Investor.gov (https://www.investor.gov/) to check out the background, including registration or license status, of any firm or investment professional. We urge investors to work only with a currently licensed or registered investment professional or firm.

Additionally, verify that you are communicating with an investment professional and not an imposter. For example, contact the professional using a phone number or website listed in the firm’s Client Relationship Summary (Form CRS (https://www.investor.gov/introduction-investing/investing-basics/glossary/form-crs)). To ensure you are looking at a genuine copy of the firm’s Form CRS, follow these steps:

1. In the “Check Out Your INVESTMENT PROFESSIONAL” search box on Investor.gov (https://www.investor.gov/), select “Firm” from the drop down options and type in the name of the firm.

2. In the search results, click on the relevant firm and then click on “Get Details.”
3. Click on “Relationship Summary” or “Part 3 Relationship Summary.”

If someone misrepresents that they are registered or impersonates a registered investment professional, report it to the SEC (https://www.sec.gov/tcr). To learn more, visit our Impersonation Schemes webpage (https://www.investor.gov/protect-your-investments/fraud/types-fraud/impersonation-schemes) on Investor.gov (https://www.investor.gov/).

Stock Recommendations You Receive Through Social Media May Be Part of an Investment Scam.

You likely have seen ads online or on social media platforms that promise stock tips. Some of these ads may purport to be affiliated with a well-known individual in the finance and investing industry. They may promise astronomical investment returns, including 100 percent or more.

Guaranteed High Investment Returns. A promise of high investment returns – often accompanied by a guarantee of little or no risk – is a classic sign of investment fraud. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.

When you click on one of these ads, you may get automatically added to a social media group chat. The next thing you know, you are messaging with someone who purports to be an “investment adviser” (and/or their “assistant”) and recommends that you buy shares of specific well-known companies.

If you follow the recommendations and see returns on these investments, you may begin to gain a false sense of trust. Once the so-called investment adviser has your trust, they may advise you to purchase shares of relatively smaller companies (including companies listed on major U.S. stock exchanges) and to send them screenshots of your purchases. The next thing you know, the stock price plummets and you lose most of your investment.

Fraudsters Can Manipulate a Stock’s Share Price to Profit at Your Expense.

Fraudsters can manipulate the share price of a company’s stock (either positively or negatively) by spreading rumors (https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/updated-1) on social media. Fraudsters then profit at investors’ expense. For example, fraudsters may use social media to increase a company’s share price including through:

- Pump and dump (https://www.investor.gov/investing-basics/avoiding-fraud/types-fraud/pump-dump-schemes) schemes – pumping up the share price of a company’s stock by making false and misleading statements to create a buying frenzy, and then selling shares at the pumped up price.

- Scalping – recommending a stock to drive up the share price and then selling shares of the stock at inflated prices to generate profits.

- Touting – promoting a stock without properly disclosing compensation received for promoting the stock.

In other instances, fraudsters start negative rumors urging investors to sell their shares so that the stock price plummets and then the fraudsters take advantage by buying shares at the artificially low price.

Fraudsters may promote a stock (https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investor-35) or spread negative rumors about a stock through social media anonymously or while pretending to be someone else. Fraudulent stock promotions on social media can take various forms, including memes.

Market Manipulation is Not Limited to Microcap Stocks.

While microcap stocks (https://www.investor.gov/glossary/glossary_terms/microcap-stock) (some of which are penny stocks and/or nanocap stocks) tend to be more susceptible to market manipulation (https://www.investor.gov/introduction-investing/investing-basics/glossary/market-manipulation), pump and dump schemes are not limited to microcap stocks. When it comes to stock recommendations you receive through social media, do not let your guard down because the company is listed on a major U.S. stock exchange.

Additional Information

Social Media and Investment Fraud (https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/social-media)

FINRA Investor Alert: Social Media ‘Investment Group’ Imposter Scams on the Rise (https://www.finra.org/investors/insights/investment-group-imposter-scams)

Thinking About Investing in the Latest Hot Stock? Understand the Significant Risks of Short-Term Trading Based on Social Media (https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-alerts/investor-alert-thinking-about-investing-latest-hot-stock-understand-significant-risks-short-term)

Social Sentiment Investing Tools —Think Twice Before Trading Based on Social Media (https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-18)

Report possible securities fraud (http://www.sec.gov/complaint/tipscomplaint.shtml) to the SEC.

Ask a question or report a problem (https://help.sec.gov/) concerning your investments, your investment account or a financial professional.

Visit Investor.gov (https://www.investor.gov/), the SEC's website for individual investors. Receive Investor Alerts and Bulletins from OIEA by email (https://public.govdelivery.com/accounts/USSEC/subscriber/new) or RSS feed (http://www.sec.gov/rss/investor/alertsandbulletins.xml).

This Investor Alert represents the views of the staff of the Office of Investor Education and Advocacy. It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This Alert, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

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