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A bit more - same case

ASIC will also use the case to illustrate the delay caused by the chronic under-resourcing of the Commonwealth Director of Public Prosecutions, which was handed ASIC’s brief of evidence in December 2022.

A pump-and-dump scheme is an organised effort to manipulate share prices higher for profit. This one allegedly involved pumping up nine mainly small-cap miners over a three-week period in September 2021.

The Australian Securities and Investments Commission alleges the ring leaders bought shares in the target companies ahead of making a “pump announcement” on Telegram channels.

One channel titled “ASX Pump and Dump Group” had 1666 subscribers and a second “ASX Pump and Dump Channel” had 1030 subscribers. A third was used allegedly by the ring leaders to co-ordinate the scheme.

Channel members would then buy the stock as it shot up, in some cases by nearly 100 per cent, before the ring leaders dumped their holdings causing the price to crash.

The group is alleged to have made $85,000 profit over three weeks.

‘Go to hell with the AFR’

The scheme was first exposed by The Australian Financial Review in its first week after penny stock gold miner Australasian Gold Limited soared after it was named as a pump target.

The shares opened up 9.8 per cent at 28¢, before rallying to about 30¢ before being mentioned on the Telegram groups at 10.15am AEST. The pump signal created a surge to as high as 47¢ minutes after.

The stock’s peak equalled an 84 per cent gain.

According to market data, a total of 356 trades for 2.32 million shares worth almost $1 million were placed before the ASX intervened and put the shares into a trading halt at 10.20am.

Rather than being scared off by the reporting, which came around midday, the group was emboldened and fed off its new-found notoriety.

“Let’s pump A8G [Australasian Gold] again and finish what we started. For everyone’s sake in the group,” one person said. “FIRE UP YOU APES”; “Hope the down rampers go to hell with the AFR”; “any publicity is good publicity”.

After the trading halt was removed just before 1pm, Australasian Gold’s shares began to move higher again, though it did not last. By market close, the price was back below 30¢ and the mood had changed.

Messages included: “I’m down 22% guys, what should I do?”; “Cheap lesson”; “It’s the clowns who sold”; “you realise most of us are in the red”.

ASIC’s warnings ignored

ASIC will allege Australasian Gold was the fourth target in the month after Marquee Resources, TTA Holdings, and Albion Resources. Other companies pumped then dumped included Ozz Resources, Locksley Resources, Culpeo Minerals, Jayex Technology, and Western Gold Resources.

A guide to one Telegram channel claimed there was “NOTHING ILLEGAL in participating in a Pump and Dump scenario”, adding “this kind of paranoia is widespread among traders”.

“We arrange penny pumps on the ASX” the about section said, adding it did this every Monday and Thursday for companies with a market capitalisation of less than $15 million. Another channel said it targeted small caps that had price sensitive announcements “to avoid a quick trading halt”.

ASIC later intervened in similar groups that emerged in later weeks to warn members what they were doing could be illegal. Their advice was rebuffed.

“Best you go and get the corporation’s [sic] that do it then instead of hassling the small investors here trying to make a few dollars,” one person wrote in reply, before adding that there was “nothing illegal about making stock recommendations, otherwise everyone that traded would be in prison”.

“This has clearly been sent by someone from another telegram group trying to spook people here. ASIC don’t send messages like this,” the person added.

ASIC’s market surveillance team began monitoring the group and channel involved in the allegations after receiving a referral from the ASX. The alleged ring leaders were then identified using analysis of trading patterns followed up by search warrants to obtain their laptops and phones.

On the request of ASIC the trading accounts of the four defendants were then suspended, and the groups were restricted to prevent people in Australia accessing them.