(United States, 21st) FBI data reveals that market manipulation cases involving small Chinese companies listed in the US have tripled so far this year compared to the same period last year. Many of these cases involve artificial intelligence (AI) bots spreading false information, artificially inflating stock prices and then selling off.
According to Nikkei Asia on Saturday (September 20), this typical “pump and dump scheme” is especially rampant among Chinese enterprises. Nasdaq stock market data shows that since 2022, among the cases reported to the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) for suspected market manipulation, around 70% involved Chinese-funded companies.
Roger Grimes, Chief Information Security Officer at cybersecurity firm KnowBe4, believes that when 70% of the companies involved are Chinese-funded, it indicates coordinated operations by criminal groups.
A recent example is Ostin Technology Group, a manufacturer of electronic display equipment. Its stock price soared to a peak of $225.50 on June 25, only to plunge by 90% the next day, now trading in single digits. On September 12, the US Department of Justice announced criminal charges against two co-presidents of the company, accusing them of masterminding a stock price manipulation scheme.
In addition, over the past few months, there have been at least six other cases involving Chinese-funded enterprises. The stock price of these companies spiked around May, then crashed between late June and late July, causing investor losses of nearly $4 billion.
In these cases, victims are often lured by social media ads to join chat groups on messaging apps like WhatsApp. These groups contain members claiming to be financial advisors and investors, who not only share public information, but also disseminate private information. In reality, most of these members are AI bots.
Once the bots gain the victims’ trust, they begin to spread information about these Chinese companies, encouraging them to enter the market and drive stock prices higher.
US regulators have taken corresponding measures this year. In early September, Nasdaq proposed stricter listing requirements for Chinese-funded companies, including raising IPO size to at least $25 million, and is also considering speeding up delisting for companies whose market capitalization falls below certain thresholds.
The US Department of Justice has also set up a special investigative team, and in March criminally charged individuals from Malaysia and Taiwan, alleging that they manipulated the stock price of a Chinese-listed company—China Liberal Education Holdings—between November 2024 and February this year, and froze $214 million in funds.
Grimes expects such cases of personal data theft or investment fraud via social media will increasingly be driven by AI, and that regulators will likewise deploy AI to combat these crimes. "The future battle will be fought between good AI bots and bad AI bots, with the strongest algorithms emerging as the winners."
According to Nikkei Asia on Saturday (September 20), this typical “pump and dump scheme” is especially rampant among Chinese enterprises. Nasdaq stock market data shows that since 2022, among the cases reported to the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) for suspected market manipulation, around 70% involved Chinese-funded companies.
Roger Grimes, Chief Information Security Officer at cybersecurity firm KnowBe4, believes that when 70% of the companies involved are Chinese-funded, it indicates coordinated operations by criminal groups.
A recent example is Ostin Technology Group, a manufacturer of electronic display equipment. Its stock price soared to a peak of $225.50 on June 25, only to plunge by 90% the next day, now trading in single digits. On September 12, the US Department of Justice announced criminal charges against two co-presidents of the company, accusing them of masterminding a stock price manipulation scheme.
In addition, over the past few months, there have been at least six other cases involving Chinese-funded enterprises. The stock price of these companies spiked around May, then crashed between late June and late July, causing investor losses of nearly $4 billion.
In these cases, victims are often lured by social media ads to join chat groups on messaging apps like WhatsApp. These groups contain members claiming to be financial advisors and investors, who not only share public information, but also disseminate private information. In reality, most of these members are AI bots.
Once the bots gain the victims’ trust, they begin to spread information about these Chinese companies, encouraging them to enter the market and drive stock prices higher.
US regulators have taken corresponding measures this year. In early September, Nasdaq proposed stricter listing requirements for Chinese-funded companies, including raising IPO size to at least $25 million, and is also considering speeding up delisting for companies whose market capitalization falls below certain thresholds.
The US Department of Justice has also set up a special investigative team, and in March criminally charged individuals from Malaysia and Taiwan, alleging that they manipulated the stock price of a Chinese-listed company—China Liberal Education Holdings—between November 2024 and February this year, and froze $214 million in funds.
Grimes expects such cases of personal data theft or investment fraud via social media will increasingly be driven by AI, and that regulators will likewise deploy AI to combat these crimes. "The future battle will be fought between good AI bots and bad AI bots, with the strongest algorithms emerging as the winners."