The Washington State Department of Financial Institutions (DFI), Securities Division has received a complaint from a Washington resident regarding a WhatsApp group called “Wealth Trading Circle VIP16 that appears to be operating a pump and dump scheme.
The investor was introduced to the WhatsApp group after receiving a message from someone impersonating a legitimate registered broker. The impersonator told the investor that he is a Chief Strategist at Merrill Lynch. The investor was introduced to the impersonator’s “assistant”, who also claimed to work at Merrill Lynch. The impersonator offered the investor an opportunity to invest in a “core stock project” where he would recommend various stocks to purchase, promising the investor a return of approximately 15% to 25% within about 3 to 7 days. The impersonator claimed that the stock recommendations are based on “in-depth research and professional analysis.”
Prior to investing, the impersonator or his assistant gathered the amount of funds the investor had available for the stock purchase. The impersonator would advise the group on what stock to purchase, when to purchase, and when to sell the stock, often having investors wait until the stock reached one or two target price points before selling. The impersonator claimed that he would also be investing in the stocks he recommends from the $2 billion in funds he purportedly manages. The investor was told on several occasions to “strictly follow the trading strategy” and they would receive guaranteed profits. If any losses occurred following his trading strategies, the impersonator promised that he would compensate the investor. After each stock purchase, the investor was directed to send a screenshot to the impersonator or his assistant. The investor was told that the trading strategies were free for the first three months, but after, the investor would pay a 5% to 10% commission fee based off the investor’s total profits from following the impersonator’s trading strategies.
PicoCela, Inc. ($PCLA) Stock Recommendation
The investor was initially advised to purchase PicoCela, Inc. ($PCLA) stock when the value of PCLA was approximately $8 a share. The investor was told to hold on to the stock until PCLA reached the first target price of $10 per share or the second target price of $12 per share. If they held on to the stock, the impersonator promised the investor would receive a return of approximately 15% to 25%.
The impersonator told the investor to sell their PCLA shares when PCLA was valued at around $5 a share. The investor lost over $7,000, The impersonator claimed PCLA shares dropped in price due to an investor spreading fear and panic on other trading platforms. Later, the impersonator claimed the drop in price was due to PCLA being a target of a “short selling institution.” The impersonator condemned the investors in the group who believed in the panic and sold their shares. For the investors who did not sell their shares, the impersonator offered to charge a lower commission fee as a reward and claimed he would recoup their losses on the next core stock trade, promising a return of 50% or higher.
Wellchange Holdings ($WCT) Stock Recommendation
The impersonator next recommended the investor purchase shares of Wellchange Holdings ($WCT), when WCT was valued at around $2.50. The impersonator told the investor to hold on to the stock until WCT reaches a price of $3.50. Within days, WCT declined in price, to a value of approximately $0.50. The investor lost around $47,000.
Red Flags
- Pressure to take action –the impersonator and his assistant told the WhatsApp group on numerous occasions to be patient while the stocks reach the target prices, often continuing to pressure the investor to purchase more shares of the stocks with promises of a larger return. Several times, the impersonator and his assistant pressured the investor to sell other stocks they held in their portfolio and use the proceeds to purchase additional PCLA or WCT shares.
- Aggressive behavior- if the investors did not follow the impersonator’s trading strategies, the impersonator threatened to ban the investor from ever working with Merrill Lynch, to remove them from the WhatsApp group, label them as a “malicious short seller”, and remove them from participating in “any compensation policy.”
- Promises of large profits and guaranteed returns – the impersonator often promised large returns if the investor continued to purchase additional shares of PCLA or WCT. The impersonator launched a reward program where if ones in the WhatsApp group invited 3 or more friends to the group, the investor would receive a “core high-quality stock from me, with a guaranteed return of over 20%.”
- Promise to recover losses - when the PCLA and WCT stock prices plummeted, the impersonator made false promises to compensate the investor in full, such as providing another stock recommendation that would give the investor a larger return that would cover their losses and more, an opportunity to participate in an “IPO project” where the investor would make “ten times the profit compensation”, or provide the investor cash to cover their losses. The investor never received funds from the impersonator.
The impersonator used the WhatsApp number 1-619-243-9841 and his assistant used the WhatsApp number 1-646-423-7095.
These allegations have not been verified by DFI.
How to Avoid Becoming Victim of a Scam
DFI urges consumers to exercise extreme caution before responding to any solicitation offering investment advice or financial services. Investment professionals need to be licensed with DFI to offer investments to Washington residents. To check the licensing status and to find out if there are any complaints against an investment professional, please visit FINRA Brokercheck.
How to Report
If you believe you are a victim of this alleged scam:
- Report to FBI
- If you are outside Washington State: contact your local Securities Regulator
- If you are a Washington State resident: Submit a Complaint for statistical purposes.
Additional Resources
Virtual Currency, Cryptocurrency, and Digital Assets Information for Consumers
What You Can Do to Avoid Investment Fraud
Information regarding Pump & Dump schemes and how to protect yourself