SINGAPORE - Heeding advice given by "investment gurus", seven victims bought more than 49,000 shares in a United States-listed company in recent months.
Within two days, the share price plunged by nearly 80 per cent and they made sharp losses of over US$1.07 million (S$1.45 million).
Their experience is not unique.
In an advisory on Wednesday (Aug 11), the police said they have seen a resurgence in such "pump and dump" scams, where fraudsters hype up the price of a company's shares by sharing fake or greatly exaggerated positive news.
Once unwitting victims buy the shares and the price rises, these fraudsters, who claim to be from abroad, quickly sell their holdings for a profit. This causes the price to plunge and the victims are left counting their losses.
The police said that most victims got to know the swindlers through social media or instant messaging platforms WhatsApp and WeChat.
"In almost all instances, the victims were persuaded to purchase shares listed on either the Hong Kong or United States stock exchanges," they added.
The fraudsters lure victims in two ways, the police said.
In the first method, they pose as attractive women on social media or instant messaging accounts and initiate conversations.
To cultivate trust, they do not mention buying shares at first but claim to want to get to know their victims better or network with them.
Once the fraudsters sense that they have gained the person's confidence, they claim to possess insider information and encourage victims to buy the shares of certain overseas-listed companies, promising quick profits.
In the second method, fraudsters pose as investment gurus or share-trading experts, the police noted.
They invite multiple victims to chat groups on instant messaging platforms, purportedly to share their insights on the stock market.
To create the illusion that they are legitimate, the fraudsters may first offer stock recommendations that turn out to be profitable.
Then, they tell their victims that the share price of a certain "high quality" company will soon increase significantly and encourage them to invest.
In both instances, the fraudsters would ask their victims to send a screenshot of their trading account transactions to show proof of purchase.
"It is believed that the fraudsters operating these chats are remunerated by masterminds based on the number of people they had successfully persuaded.
"Hence, they needed the screenshots to claim their rewards," the police said.
On whether any of these fraudsters have been caught, the police told The Straits Times they are working with foreign authorities on the matter.
The advisory on Wednesday is the second such notice in recent months.
In February, the Monetary Authority of Singapore and the Singapore Exchange Regulation warned of similar "pump and dump" schemes that involve using social media to hype up stock prices.
On Wednesday, the police reminded the public to be wary of stock tips provided by people they have not personally met before.
"If you require financial advice, it is strongly encouraged that you deal with entities or people regulated by the Monetary Authority of Singapore," they said.
The police also advised the public to be "especially sceptical" of recommendations to purchase overseas listed shares with low liquidity, small market capitalisation or with high shareholding concentration. This is because such shares are highly volatile and more susceptible to manipulation by fraudsters.
"Investments which promise high returns usually come with high risks. Do not be tempted by insider tips or promises of quick guaranteed returns. Always conduct your own due diligence before investing," the police added.
If convicted of a cheating offence under the Penal Code, the fraudsters can be jailed for up to 10 years and fined.