New Zealand’s Financial Markets Authority (FMA) has issued urgent warnings about a sharp rise in pump-and-dump scams targeting New Zealand investors. These schemes, once associated with penny stocks and cold calls, have evolved into sophisticated online operations using deepfake ads, social media, and encrypted messaging platforms.

How the scam works

Fraudsters create fake ads on platforms like Facebook and Instagram, often impersonating well-known New Zealand business leaders or financial commentators. These ads invite investors to join “exclusive investment clubs” on WhatsApp or other message platforms. Initially, members are encouraged to buy shares in reputable companies (such as Tesla or Nvidia) to build trust.

Next the fraudsters running the group shift focus to low-value shares in overseas-listed companies, where scammers coordinate purchases to inflate the price of those shares – this is called the “pump.” They start by buying these shares at low prices, then convince those in the ‘investment clubs’ to also buy, creating the illusion of rising demand. As more victims join in, the share price surges artificially, making the investment appear profitable. Once prices peak, scammers sell their holdings, selling at a higher price and making a profit – this is called the “dump”. This then leaves the unsuspecting investors in the ‘investment clubs’ with shares that have dramatically decreased in value.

Sadly, the deception doesn’t end there. Victims are often targeted again through “recovery scams”, where fraudsters pose as agents offering refunds or compensation in exchange for personal information or additional fees. This follow-up scam adds another layer of potential financial loss and identity theft risk.

The perfect storm for fraud

The FMA reports multiple complaints but warns these are “only the tip of the iceberg.”*  Scammers are exploiting social media reach and using urgency tactics, creating a sense of FOMO (fear of missing out) to pressure quick decisions. The rise of low-cost trading platforms and easy access to overseas-listed shares has made it easier for fraudsters to coordinate this price manipulation. At the same time, encrypted messaging apps allow scammers to operate anonymously and reach a large audience quickly. AI technology has also made it easier for scammers to create fake accounts, impersonating well-known local investment experts.

How to recognise and avoid pump-and-dump schemes:

• Be cautious with financial ads on social media. If a well-known business leader or commentator is featured, they may be an imposter.
• Do not engage with any unsolicited messages regarding financial advice or investment market recommendations.
• Be wary of urgent trade tips, especially for emerging or low-priced shares. Scammers often pressure people to act fast by playing on fear of missing out.

For full details and the latest guidance, please see the FMA website.  We’ve included key information in this article but recommend visiting their site for the most up-to-date details.

Bottom line: Pump-and-dump scams are not just an overseas problem - they’re here in New Zealand, and they’re evolving fast. Be wary, do your due diligence, and remember: if it sounds too good to be true, it probably is.

*FMA - Pump and dump scam nets Kiwi investors