In July, global investors suffered heavy losses totaling $3.7 billion after being lured into Chinese penny stocks listed in the U.S. Many of these small-cap shares soared rapidly due to aggressive promotion on social media, only to crash within days.
According to data from analytics firm InvestorLink, seven Chinese small-cap stocks listed on Nasdaq — Concorde International, Ostin Technology, Top KingWin, Skyline Builders, Everbright Digital, Park Ha Biological Technology, and Pheton Holdings — each collapsed by more than 80% in recent trading sessions.
These stocks had initially skyrocketed as they were heavily touted across WhatsApp groups and online forums, before a wave of selling wiped out billions in market capitalization.
Analysts and investors see strong indications of a “pump-and-dump” scheme — where stock prices are artificially inflated before being dumped on unsuspecting buyers. While there is no evidence directly linking the named companies to the price manipulation, the suspicious trading patterns have raised concerns.
The FBI reported that investor complaints related to pump-and-dump fraud surged 300% year-on-year, with victims often targeted on social media by impostors posing as licensed brokers or well-known analysts.
Not only retail traders but also professionals fell into the trap. Tia Castagno, a London-based executive coach, revealed she lost her entire savings after being persuaded to invest in Ostin Technology through a WhatsApp group.
“I feel empty and ashamed… I keep asking myself how I could have made such a mistake,” she told the Financial Times.
In the U.K., lawyer Ryan Sweetnam of Cel Solicitors said he has represented more than 100 clients caught in Chinese penny stock scams in recent months.
For months, InvestorLink CEO Matthew Michel has been issuing regular warnings about suspicious social media activity surrounding U.S.-listed microcaps, even sending alerts to the Financial Times. A major Wall Street trading firm also raised red flags to the SEC and Nasdaq, though both regulators declined to comment.
One stark example: Pheton Holdings lost 95% of its market value in a single session, despite warnings from InvestorLink weeks earlier.
Scammers are becoming increasingly sophisticated, setting up WhatsApp groups that mimic legitimate U.S. brokerage firms or coordinating discussions on Reddit. Data analysis even traced some accounts involved in stock promotion back to Russia and Iran.
Perhaps the most extreme case is Regencell Bioscience, a Chinese herbal medicine company that reported a $4.4 million loss in 2024 yet saw its stock price surge nearly 60,000%, reaching a market capitalization of $38 billion — larger than Jefferies and Walgreens combined. The stock later plunged 83%.
In response, Meta — owner of Facebook, Instagram, and Threads — said it is investing heavily in anti-fraud technology and collaborating with banks and governments to curb financial scams of this kind.
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