Wall Street’s Stamp of Legitimacy Fuels Suspected Pump-and-Dump Schemes

US regulators are scrutinizing how dozens of small, foreign-based companies became targets of chatroom stock promoters

By Weihua LiNicola WhiteMathieu BenhamouArmand Emamdjomeh January 29, 2026

A Malaysian eyebrow pencil supplier with four retail stores. A Singapore company with $76,000 in revenue that promoted using leeches and maggots to treat chronic wounds. An event planning firm whose website used cartoonish avatars for employees and whose investor presentations included a Gmail address to contact the chief executive.

Those hardly sound like the next Amazon or Nvidia, but investors around the world have poured money into dozens of stocks like these, only to see billions in market value wiped out. They’ve fallen victim to a plague of apparent pump-and-dump schemes — Wall Street shorthand for scammers who get a quick windfall by hyping a stock they own to stratospheric levels, often in social media chatrooms, and sell near the peak before the price craters.

Such episodes are becoming more frequent, according to a Bloomberg News analysis of public offerings plus subsequent chatroom promotions and market movements. They typically involve tiny companies based in Asia taken public by US-based underwriters specializing in so-called microcap stocks.

The analysis shows a quarter of the more than 250 companies that went public on Nasdaq’s smallest listing tier since 2023 were promoted in WhatsApp group chats, and then crashed or were suspended by the US Securities and Exchange Commission over concern about potentially manipulative trading. Five microcaps that went public on the New York Stock Exchange’s small-cap level during the same period show similar trading patterns.

While it’s tempting to write off victims as gullible, some of the firms whose trading was suspended by the SEC were feted at confetti-covered closing bell ceremonies by Nasdaq, whose listing was seen by some investors as an endorsement.

“It’s just gotten so large now that it’s an epidemic; it’s not a one-off,” said Matthew Michel, founder of predictive analytics firm InvestorLink Capital Markets, who has been sending red-flag alerts to regulators. This past year, he said, “has been the apex of the pump and dump.”

None of the companies in Bloomberg’s analysis or their underwriters has been accused by authorities of any wrongdoing in connection with improper trading activity. It’s possible for pump-and-dump practitioners to seize on a publicly listed stock without the company being aware.

Nasdaq and the New York Stock Exchange declined to comment for this article. Nasdaq has said it must list companies that comply with its rules, but the exchange has started changing some of them to curb what it describes as problematic trading. The exchange said in December it will turn down stock listings when it spots red flags, such as concerns about the integrity of the company’s initial public offering advisers, including auditors and underwriters. It’s also raising the minimum public float — the total shares available to the general public — and has proposed more requirements for companies based in China.

That’s not good enough for Charles Schwab & Co., a mainstay of individual investors, which called out Nasdaq in a December comment letter to the SEC. Schwab said it’s been raising concerns for years about fraud associated with small foreign firms, citing damage to its clients “exposed to significant risk from issuers that have the imprimatur of being listed on an exchange.” It advocated for faster delistings and said it took the unusual step of restricting trading in about 200 companies.

“Many of these microcap securities are nexuses for major fraud – pump and dump schemes often orchestrated by company insiders,’’ Schwab wrote. “Exchanges such as Nasdaq are not properly policing existing listing standards and have overly lenient rules that allow fraudulent firms to stay listed for much too long, allowing the fraud to snowball.’’

So what’s a pump-and-dump? In its simplest form, stock manipulators buy stakes in a company with a low number of shares available to trade; this makes their prices easier to manipulate. Grifters cajole others to buy at ever-rising prices, sometimes using high-pressure tactics via online forums and chatrooms, and then dump their own holdings in bulk. This sends the price plunging, imposing painful losses on investors who fell for the pitch.

Bloomberg’s analysis encompassed stocks whose prices plunged 50% over two trading days, and cross-referenced watchdog sites where posters shared screenshots of social media chats hyping the companies. The analysis also included stocks suspended by the SEC on concerns about potential trading manipulation.

The majority of the highlighted companies have operations based in Asia. That’s in part because there are simply more foreign companies making their US market debut; the number of small Asia-headquartered companies seeking IPOs on Nasdaq’s smallest tier, raising less than $10 million on average, has doubled since 2023. Trading in about one-third of those companies, or 66 in total, showed evidence of stock manipulation; just six non-Asian microcaps showed similar patterns, in Bloomberg’s analysis.

WhatsApp messages shared with Bloomberg reveal how these schemes exploiting US-listed firms have gone global. Andreas Mikulic, 51, a Swedish entrepreneur, said he lost more than $20,000 in two weeks in September.

In a statement, a WhatsApp spokesperson said the company offers users tools to block and report suspicious messages for WhatsApp to investigate. In a post about scams last year, WhatsApp disclosed that it took down 6.8 million accounts linked to frauds generally, though it didn’t break out statistics for stock manipulation schemes.

“Our entire purpose is to protect people’s right to a private conversation and we’ll continue our strong track record of holding bad actors accountable,” the spokesperson said.

The same few investment banks

Regulators are trying to stamp out the scams earlier, with mixed success. They are issuing public warnings and raising the bar for small foreign companies to list in the US. They’ve also used trading suspensions to freeze the stock of over a dozen companies since September, more than the prior three years combined.

But online hype campaigns, including those originating overseas, make it hard for US authorities to track down and prosecute whoever’s behind them. So regulators are turning their attention to domestic gatekeepers that helped the companies go public — the investment banks that underwrote the deals and guided them through the IPO process.

The Financial Industry Regulatory Authority in October announced a wide-ranging review of all underwriters who handle small, overseas-based companies. The regulator on Jan. 15 filed a complaint against a California-based underwriter and its investment banking partner, saying they ignored warning signs when helping take foreign microcap companies public, including extreme price volatility and suspicious trading. The firms, Boustead Securities and Sutter Securities, declined to comment, but they have sued Finra, claiming they lost underwriting business while the regulator conducted its “nebulous” investigation.

A new task force at the SEC attempts to crack down on securities fraud by foreign companies as well as their auditors and underwriters.

“Underwriters shouldn’t bring toxic foreign companies to US markets,” said Jamie Selway, chief of the SEC division that oversees trading and markets. “Toxic foreign small caps are not welcome here. Manipulated stocks are not welcome here.” It’s an open question whether companies directly participated in the scheme or were targeted because of their small size and low float, Selway said.

Nevertheless, the attempts at manipulation continue. In December alone, touts who impersonated stock analysts asked retail investors via WhatsApp chats to purchase shares in at least three more small, Asia-based companies whose stock prices then crashed by more than 80% in a day, according to Bloomberg’s analysis. All told, about $16 billion in market capitalization has evaporated since 2023 in one-day or two-day crashes by new firms listed on the Nasdaq Capital Market exchange that showed pump-and-dump patterns.

Pump-and-dump operations have been going on for decades, with cold callers operating what prosecutors called “boiler rooms” or “bucket shops.” The most notorious included Stratton Oakmont, the 1990s-era brokerage based outside New York memorialized in the film The Wolf of Wall Street.

What’s different now is the massive amplification via social media, smart phones and artificial intelligence that enables operations to be based overseas, where it’s hard for US authorities to find them, let alone stop them.

This makes US investment banks, who helped line up investors for the initial offerings, a top target for regulator scrutiny. Almost all of the companies analyzed by Bloomberg debuted on US public markets with help from the same cast of small investment banks, which earn fees from managing the offerings. A typical fee ranges from hundreds of thousands to a million dollars, depending on the size of the deal.

Out of more than 70 underwriters that were active in the microcap IPO space, Bloomberg identified 30 that helped list foreign firms on the Nasdaq Capital Market exchange that were later promoted online before their stock price plummeted. That’s Nasdaq’s tier for the smallest companies, where Smart Digital was listed. Their roles included acting as the lead of the deal, building up a list of investors, helping the businesses price their stock and providing capital to other underwriters.

Just eight underwriters helped take public nearly three-quarters of the Nasdaq-listed microcap companies subjected to apparent pump-and-dump schemes, according to Bloomberg’s analysis. Some microcap underwriters have only a handful of deals under their belts but most of their clients displayed unusual trading patterns, the data shows.

While none of the underwriters has been accused of colluding with pump-and-dump crews, investment banks lend their credibility to the businesses they’re bringing public. They’re supposed to conduct due diligence about who’s running the company, whether they’re making accurate disclosures about their business and its finances, and help issuers find investors to participate in the IPO.

Finra, which started a targeted examination of underwriters in October, said in a statement that its review of small company underwriters was in the early stages.

“Addressing small-cap fraud is an organization-wide priority at Finra in support of our mission to protect investors and safeguard market integrity,” Dan McClain, Finra’s vice president of surveillance and market intelligence, said in a statement.

One firm, US Tiger Securities, drew Finra’s scrutiny in April. The New York underwriter has handled about 20 small IPOs since 2023, including Smart Digital. The firm and its securities broker affiliate, TradeUP Securities Inc., paid a total of $950,000 to settle allegations including that they failed to detect suspicious trading by foreign entities, according to Finra. The regulator cited transactions in thinly traded, low-priced securities and alleged failures to implement anti-money laundering systems to detect and report red-flag transactions.

US Tiger and TradeUP, which share a Madison Avenue address, consented to the sanctions without admitting or denying Finra’s findings. Representatives for the two firms and their Beijing-based parent, Up Fintech Global Holdings Ltd., didn’t respond to requests for comment.

Some boutique underwriters identified in Bloomberg’s analysis focus specifically on taking Asian companies public in the US, like Cathay Securities. In October, it helped underwrite CCH Holdings Ltd., a Malaysia-based company that operates a chain of chicken claypot restaurants. The chain debuted on Nasdaq in October with a $5 million IPO and rang the exchange’s closing bell in a ceremony on Dec. 5. Within a few days after that, it had reached a nearly $300 million market cap.

The next day, the stock plummeted more than 80%. On the VampireStocks subreddit, where users warn about what they say are scammy trades, investors posted screenshots of messages on WhatsApp from purported “advisers” who tried to blame short sellers for the implosion. The shares, which briefly topped $15, now hover around 50 cents. CCH didn’t respond to requests for comment. The company said in a Jan. 5 news release it’s planning to expand by purchasing three restaurant groups in Malaysia and opening a chicken claypot outlet in midtown Manhattan.

Bloomberg’s analysis shows Cathay helped take public seven other companies that exhibited pump-and-dump trading patterns, including Charming Medical Ltd., a Hong Kong-based Chinese traditional medicine firm focused on women’s health. Investors in December filed a class-action lawsuit against the company and its public offering advisers, including Cathay, saying they “turned a blind eye” to a blatant social media promotion campaign and ignored the stock’s unexplained surge from $4 to more than $29.

The SEC suspended trading in November, citing the same issues. Charming Medical said in a regulatory filing it would cooperate with authorities. Representatives for Cathay didn’t return requests for comment, nor did Charming Medical. The class action is pending. On Cathay’s website, the firm warns against “individuals and groups falsely claiming an affiliation” with the company, and advises investors not to engage in investment solicitations on WhatsApp or other social media platforms.

Among the most prolific microcap underwriters, D. Boral Capital along with its predecessor firm helped list more than 30 firms on Nasdaq Capital Market since 2023. Ten of the IPOs, or about one-third, later became the subject of apparent pump-and-dump campaigns, Bloomberg research shows. Another underwriter, R.F. Lafferty, took public 14 firms that later showed the same pattern.

Dominari Securities LLC took 29 companies public on Nasdaq Capital Market over the past three years, and 11 saw a one-day or two-day stock price drop of more than 50% after being promoted in WhatsApp groups.

Kyle Wool, Dominari’s chief executive, previously headed Revere Securities LLC, which underwrote 40 microcap IPOs initially listed on Nasdaq Capital Market since 2023 and handled nearly two dozen of the same deals as Dominari. In social media chatrooms, retail investors were pitched on at least 12 of those companies before the stock prices tanked, Bloomberg’s analysis shows.

Dominari declined to comment; other underwriters didn’t respond to several requests for comment.

Read More: Dominari Duo Share $66 Million Pay Package for 2025

Global companies, global harm

Bloomberg reporters spoke to more than a dozen investors who said they saw their money evaporate, with most asking to remain anonymous because they feared retaliation after sharing personal information with people they believed to be fraudsters, or because they were simply embarrassed.

There were victims from Argentina to Sweden, from Dubai to Utah, from Taiwan to New York — all lured into what they thought were chat groups offering professional advice that turned out to be apparent stock manipulations.

In interviews, some people told Bloomberg they had their dream of buying a house or their own business shattered. One borrowed more than $100,000 to invest in ChowChow Cloud, a Hong Kong technology firm that went public on NYSE’s smallest listing tier in September, and they’re still on the hook for the loan after the company’s stock price tanked from more than $11 to less than $2 in a day. ChowChow Cloud did not respond to requests for comment.

Another investor hasn’t told their spouse yet that they’ve blown tens of thousands of dollars. A person who worked as a personal finance adviser his whole career had $200,000 worth of shares in Charming Medical frozen after trading was suspended.

The playbooks were strikingly similar: A general chat group headed by someone purporting to be a professor or a registered investment adviser and a personal assistant who texted one-on-one stock tips. Some investors said they clicked on Instagram or Facebook ads to learn about investing. Others said they thought they were following well-known financial influencers but now acknowledge they were probably impersonators. All the initial contacts led to group chats that doled out seemingly smart financial advice about the market to build trust. Then came the killer stock tip: This is an exclusive opportunity available only to VIPs, act now or miss out.

The schemes are so common that Edwin Dorsey, author of an investing newsletter The Bear Cave, built a website that crowdsources thousands of WhatsApp screenshots and attempts to warn the public about bad investments.

“In the past, a lot of the pump-and-dump scams were about faking numbers in the filings,” Dorsey said. “Now the numbers have dumbed down so much that they didn’t feel like they needed to lie.”

Some WhatsApp stock promoters tried to squeeze more money out of investors by offering tips on other microcaps. One investor who was already out $35,000 told Bloomberg he was advised to switch to Cuprina Holdings, a biotech developing leech and maggot woundcare. The investor’s brokerage firm wouldn’t let them make the trade. Cuprina’s stock crumbled in August and now trades around 50 cents. The firm’s CEO in an email said the company has no visibility into social media, private chat groups or other third-party communications that discussed the company.

Two federal investigations in 2025 revealed how much alleged perpetrators can pocket from stock schemes. US prosecutors in March indicted seven people in Malaysia and Taiwan, claiming they coordinated a social media-fueled pump-and-dump of the stock of China Liberal Education Holdings Inc., a firm that sells textbooks and provides overseas study consulting services. Authorities seized $214 million in alleged illicit funds. The company wasn’t accused of wrongdoing but lost its Nasdaq listing in June in part for “public interest concerns.”

In September, prosecutors charged the co-CEO of Ostin Technology Group Co. and a financial adviser with allegedly bilking investors out of more than $100 million by artificially inflating the shares of the China-based company. Nasdaq halted trading following the indictment; the company fired the co-CEO and formed a committee to investigate the prosecutors’ accusations.

Charges in both cases, which included securities fraud and wire fraud, are pending. Judges in both cases have issued warrants for the foreign defendants, but no arrests have been made. China Liberal Education and Ostin Technology didn’t respond to requests for comment.

Bloomberg reached out to the 13 firms the SEC has suspended since late September. All but one, JM Group Ltd., a Hong Kong wholesaler of toys and seasonal decor, were listed on Nasdaq. Most didn’t return requests for comments. Smart Digital, whose Singapore address showed no corporate signage when a Bloomberg reporter visited in early December, said in a statement it had no information to share beyond what’s been publicly disclosed. It announced Jan. 12 it moved headquarters to Zhuhai, China.

Jacob Frenkel, attorney for MaxsMaking Inc., a Shanghai-based maker of customized aprons and tablecloths that the SEC also suspended, said its management, officers and directors weren’t involved in alleged manipulative activity. “This client has a real business and is suffering,” Frenkel said.

As for investors, prospects of getting repaid are dim, given how hard it is to identify the anonymous promoters. Even if they can be found, the SEC’s power to enforce restitution may be in jeopardy. An admitted pump-and-dump perpetrator is arguing before the US Supreme Court that the SEC should lose its authority to recoup illegal gains if it doesn’t show quantifiable harm.

Read More: SEC Power to Recoup Illegal Gains Gets Review From Supreme Court

Rightly or wrongly, some investors regard a listing on a major US exchange as a kind of endorsement. Rosana Rozenblum, 60, a retired custom printer from Argentina, didn’t check Smart Digital’s website (which was mostly in Chinese) but she did look up the market capitalization after getting pitched on the stock by a WhatsApp user who described themselves as an investment adviser. Small didn’t scare her.

“A stock in Nasdaq was something like a guarantee, from my point of view,” Rozenblum said. She invested her entire $9,000 nest egg — and lost it all when the shares imploded and trading was frozen.