The suspects are accused of running a “ramp and dump” scam where certain stocks are hyped up and then recommended to people via messaging apps, before the fraudsters suddenly sell their own holdings, leaving other investors out of pocket.
Officials said the suspects, aged between 23 and 65, were picked up after a series of raids on Thursday at homes in Central, Wan Chai and The Peak, as well as at brokerages on Hong Kong Island.
The suspects were being held on suspicion of money laundering and conspiracy to defraud.
Thomas Atkinson, the SFC’s enforcement chief, explained at a press conference how victims are duped into investing.
“These scams involve fraudsters setting up different investment groups on social media platforms and claiming to offer investment tips or inside information to induce unwary investors to join the groups,” he said.
“Sometimes they call themselves investment masters or teachers, and some may even impersonate genuine or well-known market commentators by posting their photos on the chat groups.”
Atkinson added that the alleged syndicate had been very active in the past year, transferring funds back and forth across the border to try to hide the source of the money.
The commission’s CEO Ashley Alder said fraudsters often pick stocks that attract little investor interest.
“All these schemes have similar characteristics, typically the vehicles used by these fraudsters are small listed companies, in traditional industries, with a low share price coupled with very thin trading. These companies become a target for fraud because their shares are easier to corner and share prices can be manipulated with relatively small amounts of cash,” he said.
Officials said it was difficult to estimate how many victims there are, as some may be too embarrassed to come forward.
The SFC said that in all, it had frozen assets worth HK$860 million in the operation, while the police said they had seized cash and other valuables worth HK$900 million.
