A tech company executive and a financial advisor are being accused of orchestrating a pump-and-dump scheme that took over US$100 million from investors.
In an indictment that was unsealed in a federal court in Virginia, the co-CEO of Ostin Technology Group Co. Ltd. (OST), Lai Kui Sen, along with an advisor, Yan Zhao (a.k.a. Hank Shi and Hank Shu), were charged for allegedly engaging in a complex scheme to defrauded investors in OST by secretly providing tens of millions of shares in the company to a group of 15 co-conspirators at a steep discount — the recipients of those shares then allegedly engaged in a coordinated campaign to artificially inflate the value of those shares on social media, by impersonating real investment advisors touting the stock.
After pumping up the share price — from a market cap of US$22 million to over US$1 billion — authorities alleged that Zhao and Sen coordinated the selling of the shares that were provided to co-conspirators for little or no cost, which allegedly generated US$110 million in illicit profits.
The social media campaign began in mid-April, but by late June, the company, which was traded on Nasdaq, lost 94% of its market cap, US$950 million, leaving shareholders with massive losses.
According to the U.S. Department of Justice, the case was referred to law enforcement by FINRA’s surveillance and market intelligence unit.
Both defendants are charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud.
The allegations have not been proven, and they are presumed to be innocent.