How Singapore investors are lured by foreign-stock scams

For more than a month, Aaron* thought he and his wife were learning how to trade stocks. Only later would they realise the lessons were part of the trap. The Singaporean business owner had found a group of self-styled investment experts on Facebook, claiming to offer foolproof tips and guaranteed returns. Soon, he and his wife, who were dabbling in stocks for the first time, were spending about two hours every other day in a WhatsApp group chat with dozens of other participants, taking lessons from a “professor” who sent lengthy messages and documents on how to judge bullish markets, analyse market conditions and identify stocks with high potential. Through private messages, another purported expert told Aaron which stock to buy, when to buy it and when to sell, promising quick returns each time. The couple did not know then that they were being drawn into a scheme that bears all the hallmarks of what analysts call a pump-and-dump scam. In such schemes, fraudsters artificially inflate the price of a company’s shares by generating buying interest, then sell their holdings after the price rises, leaving other investors exposed when the stock falls. After making profits from two stocks under the guidance of the self-styled experts, the couple were told to prepare as much money as possible for a stock with “high potential” that “did not come by often”. “They would say, if you put in one million, you’d get back three million within a month, and if we didn’t, they’d put their heads on a chopping board,” Aaron said. He took a bank loan to buy S$650,000 (US$512,000) worth of shares in CMBC Capital – a financial services firm listed on the Hong Kong stock exchange – and noticed that its price started to decline soon after. The experts’ WhatsApp accounts also disappeared. Aaron was left scrambling to repay the bank loan after losing more than S$500,000. “I still have employees to pay and a family to feed,” he said. “We are left trying to pick up the pieces because no one is here to help us recover our losses.” Hong Kong stocks ‘ideal’ Singaporeans have been falling victim to pump-and-dump scams for years, as a scam scourge plagues the city state. Analysts say that fraudsters would typically operate with stocks listed on foreign exchanges to increase their chances of success. Trading on recognised foreign exchanges allows victims to independently identify the existence of the company, which could create a strong sense of perceived legitimacy and increased confidence, said Whistine Chai, founder and principal psychologist at behavioural risk intelligence firm ForenSights. “They may not realise that the person promoting the stock may have a vested interest in generating buying interest and driving up its price for their own benefit,” she said. Hong Kong-listed stocks were a natural target for scammers preying on Singaporeans due to several factors such as cultural and time zone similarity between both cities, said Gloria Yu, an assistant professor of finance at the Singapore Management University. The Hong Kong stock exchange, as in many markets, hosts stocks with low free float and active retail participation, features scammers can exploit to discuss coordinated buying, she added. Victims are also drawn in by low-cost online trading platforms such as Moomoo and Tiger Brokers in Singapore, which make buying foreign stock easier. “The ideal asset is one the victim knows just well enough to feel comfortable with but not well enough to verify,” Yu said. “For Singapore, Hong Kong stocks sit precisely at that point.” In August 2021, the Singapore Police Force warned the public of a resurgence in pump-and-dump scams. Four months later, it conducted a joint investigation with the Hong Kong police into a syndicate suspected of operating such scams using shares listed on the Hong Kong stock exchange. Nine people in Hong Kong and one in Singapore were arrested, and assets totalling over HK$70 million (US$9 million) were frozen. Hong Kong police said it did not maintain figures for losses incurred in cross-border pump-and-dump scams. This Week in Asia has asked the Singapore police for comment. Sounding the alarm After realising he had fallen prey to a scam, Aaron filed a police report, and contacted CMBC Capital and Moomoo – which he used to buy the shares – in a last-ditch attempt to recover his money. Singapore police told This Week in Asia the report had been lodged and they were looking into the matter. Legal provisions in Singapore allow certain securities offences to be pursued even when part of the conduct occurs overseas or involves stocks listed on an international market. CMBC Capital announced on Tuesday that it had received reports from individuals alleging its name might have been used in investment scams. The suspicious activities had been conducted without its knowledge, consent or authorisation, it said. It also said it had not independently concluded that its shares were manipulated, and had reported the suspected activities to Hong Kong authorities. Aaron, who said he had yet to hear from Moomoo and CMBC Capital, said he felt he had little recourse. This Week in Asia has contacted CMBC Capital and Moomoo for comment. As scam operations become increasingly sophisticated with technological advancements, victims are often left to bear losses when the scammers are not arrested, according to analysts, who urge collective measures across all parties involved. “Our whole mental model of what a scam looks like needs to be changed,” Chai said. “We often associate scams with unauthorised transfers and fake websites and accounts, but increasingly, scammers can exploit real institutions and legitimate infrastructure.” Individuals should verify the investment and the person recommending it separately, while platforms could implement measures such as warnings that remind investors to do so before completing the trade, she said. Yu said that brokerage platforms had the “clearest edge” in stopping ongoing scams, as they could spot abnormal trading in real-time and act directly. “The caveat is incentives,” she said, noting that brokers may hesitate to implement aggressive anti-scam measures as false alarms could frustrate customers and push them towards competing platforms. But as scams involve multiple parties – victims, brokerage platforms, social media and messaging platforms, listed companies and authorities, Yu urged coordinated effort. “The failure is in the ecosystem, not in any one node.” *Name has been changed to protect the interviewee’s identity

How Singapore investors are lured by foreign-stock scams

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Analysts say real overseas stocks, trading platforms and chat groups can give scams a veneer of legitimacy

Analysts say real overseas stocks, trading platforms and chat groups can give scams a veneer of legitimacy