The Justice Department and the Security and Exchange Commission (SEC) have charged eight men of using their social media clout to manipulate investors in a stock pump-and-dump scheme [view related]. The defendants allegedly took to Twitter and Discord to promote themselves as seasoned stock traders and, according to the SEC’s press release, fed their followers a “steady diet of misinformation which resulted in fraudulent profits of approximately $100 million.” Seven of the individuals allegedly used their social media presence to promote the stocks, while the eighth has been charged with hosting a podcast and platforming the other defendants as stock trading experts.
The SEC also issued a bulletin warning potential investors of social media investment fraud. The SEC advises against making any investment decisions based on social media testimonials and endorsements. Some scammers may impersonate legitimate brokers, catfish users on dating sites, and push fraudulent “crypto” investment schemes. The bottom line is that scammers prey on trust. Potential investors should be wary of any individual relying on the strength of their personal brand or reputation over hard data. Consumers should consider checking the background of anyone selling or offering investments and confirm that the person is currently registered or licensed using the free and simple search tool on Investor.gov.