‘Pump-and-dump’ scheme plagues HK

Hong Kong police are struggling to deal with digital pump-and-dump schemes targeting brokerages — a little-known type of computergenerated fraud that surged in the Chinese territory last year.

Although the amount of money involved was relatively small— about $20 million worth of shares— there were 81 such incidents reported last year, more than triple the number in 2015, according to police.

In the scheme, criminals invest in thinly traded penny stocks and then manipulate their share prices by ordering tradesfromhackedbrokerage accounts. They earn profits by selling before the fraudulent trades are reported.

After last year’s cyberheist of $81 million at Bangladesh’s central bank and a series of hacks of ATM’s around the world, authorities fear such pump-anddump schemes could be increasingly used for electronic theft.

Hong Kong is a favored place forsuchattacks because of the number of thinly traded penny stocks there and because its securities industry has fallen behind other financial centers indefending against cyberfraud.

At least seven brokers and eight banks have been targeted in Hong Kong, including HSBC Holdings and Bank of China International Securities, according to regulators and people familiar with confidential investigations.

A spokeswoman for BOCI Securities said the brokerage would continue to invest in IT security.

“If you ask regulators in the industry what is the No 1 threat, not surprisingly, it’s all about cyberattacks,” Ashley Alder, CEO of the Hong Kong Securities and Futures Commission and chairman of the International Organization of Securities Commissions, said in a speech to the local legislature last week.

“We’ve seen that happen not only in banking, but also at brokers in Hong Kong, in particular, recent attacks to do with basically hijacking share trading accounts.”