One of the smartest day traders in Australia recently thought he could outsmart the ASX surveillance system and make money from a classic 'pump and dump'.
The trader, who was well known to the ASX surveillance staff, used four or five accounts at two different brokers to ramp up the bid and offer spread on a mining tiddler called Corvette Resources.
He loaded up the bid schedule with 25 of the top 28 bids. This eventually smoked out buyers at prices 25 to 30 per cent higher than where the stock was trading before the exercise began.
The trader effectively created a false market in the company's shares. When the buyers emerged he sold stock to them at a profit during a brief period of frenzied trading that included him selling stock to himself.
The ASX Smarts alert system set off the alarm bells about what the trader was up to. The Smarts system triggers warnings when the price or volume movements in stocks exceed predetermined parameters.
When this information about Corvette was combined with the ASX knowledge of the brokers used by the one trader, the scam was obvious.
The ASX won't comment on the case, but it is fair to assume that the Corvette Resources market manipulation incident was referred to the Australian Securities and Investments Commission. ....
COV Price at posting:
14.0¢ Sentiment: ST Buy Disclosure: Held
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