Investors suffered massive losses in July after a handful of US-listed Chinese microcap stocks collapsed shortly after being heavily promoted on social media. Seven Nasdaq-listed companies—Concorde International, Ostin Technology, Top KingWin, Skyline Builders, Everbright Digital, Park Ha Biological Technology, and Pheton Holdings—each fell more than 80% within a few trading sessions, wiping out a combined $3.7 billion in market value, according to predictive analytics firm InvestorLink.
All seven stocks had surged in the weeks prior, fueled by promotions in WhatsApp groups and on social media. Analysts told the Financial Times that the events show classic hallmarks of pump-and-dump schemes, in which promoters artificially inflate share prices before selling their holdings. There is no suggestion the companies themselves were involved in manipulating their stock prices, and none responded to requests for comment.
The FBI recently reported a 300% year-on-year increase in complaints related to ramp-and-dump stock fraud, warning that investors are increasingly targeted online by individuals posing as legitimate brokers or analysts. Many of the recent scams are linked to the surge in Chinese companies listing on US exchanges in 2024, which has dominated the otherwise quiet US microcap IPO market.
Victims include first-time investors and professionals alike. Tia Castagno, a London-based executive coach, lost her life savings after being encouraged to invest in Ostin Technology via a WhatsApp group she joined after clicking a Facebook ad. “There’s a feeling of emptiness in my stomach, and shame,” she told the Financial Times.
UK lawyer Ryan Sweetnam, who represents more than 100 clients, described a wave of similar losses in recent months. Other victims reported being lured by seemingly legitimate US investment firms or endorsements from well-known pundits, only to see their investments evaporate.
InvestorLink had flagged unusual online activity around Ostin Technology and Pheton Holdings weeks before the dramatic share price declines. Analysis also revealed coordinated promotion on Reddit, with some accounts traced to Russia and Iran, a pattern seen in other pump-and-dump schemes.
Regencell Bioscience, a Chinese herbal medicine company, briefly soared to a market value of $38 billion despite a reported net loss of $4.4 million for 2024, before dropping 83%. There is no suggestion the company manipulated its stock price.
Meta, the parent company of Facebook, said it is investing in technology to detect scams and provide warnings to users, while also collaborating with banks, governments, and law enforcement to prevent such fraud.
US regulators, including the SEC and Nasdaq, have been alerted repeatedly to potential manipulation but have declined to comment. Analysts warn that as long as microcap IPOs continue to attract investors via social media, similar schemes are likely to persist.
