U.S. Stock "Harvesting Leeks" Scam: Inflating Stock Prices Before Selling Off, Multiple Chinese Concept Stocks Plummet, Investors Lose Billions of Dollars

A large-scale "pump and dump" scheme involving Chinese concept stocks has unfolded in the U.S. stock market, resulting in investors losing billions of dollars in just a few weeks.

On August 18, media reports indicated that in July, multiple Chinese concept stocks traded on Nasdaq suddenly plummeted over 80% after being heavily promoted on social media. According to predictive analytics firm InvestorLink, these stocks collectively lost $3.7 billion in market value.

The reports noted that analysts and investors stated that these trends exhibited typical characteristics of a "pump and dump" scheme. The FBI reported last month that complaints from victims involved in "pump and dump stock fraud" increased by 300% year-on-year.

Analysis pointed out that regulatory agencies are facing scrutiny, as analytics firms and Wall Street trading companies had previously warned the SEC and Nasdaq about the unusual activities of these stocks but failed to prevent investors from suffering significant losses.

Seven Chinese Concept Stocks Experience Collective Flash Crash

Seven micro-cap stocks listed on Nasdaq have collectively dropped over 80% in several trading days over the past few weeks. These companies include:

Concorde International, Ostin Technology, Top KingWin, Skyline Builders, Everbright Digital, Park Ha Biological Technology, and Pheton Holdings.

According to price data analyzed by predictive analytics firm InvestorLink, these declines wiped out a total of $3.7 billion in market value. All seven stocks had previously surged significantly before the sudden sell-off, promoted to investors through WhatsApp groups and social media sites.

Notably, the reports indicated that there was no evidence suggesting that any of the aforementioned companies were involved in the unusual stock price fluctuations.

Analysts and investors stated that these trends exhibited many characteristics of a pump and dump scam. Scammers impersonated "legitimate brokers or well-known stock analysts" on social media to target investors, with victims being pulled into WhatsApp investment groups after clicking on Facebook ads.

Social Media Becomes a Breeding Ground for Fraud

Media reports indicated that among the affected investors was Tia Castagno, who runs an executive training business in London. She was pulled into a WhatsApp group after clicking on a Facebook ad.

Encouraged by a seemingly legitimate U.S. investment company to invest in Ostin Technology, she ultimately lost all her savings. She stated during a media interview:

"I have a sense of emptiness in my stomach, as well as a sense of shame. I constantly question my judgment, recalling the feeling of having the rug pulled out from under me."

Ryan Sweetnam, a lawyer at the UK law firm Cel Solicitors, stated, "In the past few months, over a hundred clients have entrusted me to represent them in cases involving the manipulation and unloading of Chinese concept stocks."

A European retail investor reported a "six-figure" loss on Pheton. After clicking on a Facebook ad claiming to have the endorsement of a well-known American television commentator, the investor was pulled into a WhatsApp investment group of about 40 people.

This group of about 40 appears to be operated by legitimate American brokerages, with most members from the UK and the US.

According to reports, Matthew Michel, CEO of InvestorLink, analyzed the stock price movements of Ostin and revealed a "coordinated activity cluster" on Reddit, where 12 users posted similar stock promotion content within two hours.

According to Michel, geolocation metadata shows that three of the users are located in Russia and Iran—this is a trend that InvestorLink has found in other manipulation and unloading cases.

Regulatory Warnings Ignored

InvestorLink issued a warning about Pheton's unusual online activity to the market and the Financial Times in early July, nearly three weeks before the company's stock plummeted 95% in a single trading day.

InvestorLink warned about potential manipulation of Ostin's stock on June 9, two weeks before its stock price dropped 94% in a single day.

Over the past seven months, InvestorLink CEO Matthew Michel has emailed contacts, including the Financial Times, almost weekly, marking unusual social media activity surrounding certain US-listed micro-cap stocks.

A large Wall Street trading firm has also utilized InvestorLink's platform and has repeatedly warned the SEC and Nasdaq about potential manipulation of certain companies' stocks.