The Internet has allowed for global access to potential Wall Street related fraud. Investors and traders are connected like never before and word travels fast. But, how accurate is the information you are receiving? Traders are so quick to act on large volume and news that they rarely read through the material carefully. Then when a stock goes against them, that is when they decide to do their due diligence. Data on a company can get out so fast it is hard to fathom. A kid sitting at his computer in China can create a false Twitter account and post something that can send a stock tumbling immediately. Companies abroad in places like China have it even easier as they are not adhered by the restrictions of the United States and are almost immune to prosecution. Websites such as Twitter have given these people a huge potential platform for this type of behavior. Where is the SEC in all of this? Who knows! The rise of fake landing pages and imitated Twitter accounts are costing investors billions of dollars. "Short and distorts" and "pump and dumps" are rampant and the SEC has recently decided to crack down on these fraudulent Twitter posts.
Chinese low float stocks like BNSO and EFUT (which in my opinion are outright frauds) are the perfect target for price manipulation. These companies shouldn't even be allowed to trade on Nasdaq, but rather belong on the OTC Market. These stock exchanges need to do a better job of vetting these companies so they can help protect investors alike. Bonso Electronics BNSO recently ran over 100% on earnings and then faded quickly leaving retail traders holding the bag. The company sells kitchen and bathroom scales. BNSO's website also looks like something a kid put together. The copyright date at the bottom of the website still says 2013. Efuture Information Technology EFUT has run about 50% in the last five days on high volume with absolutely no news to speak of. They have an earnings report coming this Friday afternoon which will most likely be less than impressive. If you watch the bid and ask carefully you can see 50k and 100k bids appear, disappear and then reappear. This is most likely an attempt to hold this stock up as a large bid makes the stock appear to be bullish. Along with this tactic, you could see multiple and consistent single share buys which help manipulate price (price just reflects the last trade regardless of the number of shares). There is no way to know if it is the company itself engaging in this activity or some outside firm. Either way, the entire thing is extremely suspect. Most likely this is done by a hedge fund or brokerage firm manipulating the price and attempting to create a false market for the stock. They keep the stock up by controlling the majority of the shares, not allowing any selling, and they continue to buy. When the dumping begins a flood of shares hit the market and then supply and demand take over. The stock crashes and retail traders get crushed. Moreover, these supposed earnings of both companies are unaudited and out of Beijing, and Hong Kong, China. It's time for the U.S. and the SEC to wake up to these scams and start to crack down for the good of the U.S. retail trader. B.P. Rising Research will be doing an independent investigation to find out more information on these companies. Most retail traders work very hard for their money and are just looking to earn extra cash to take care of their families. Unfortunately, they are treated like puppets by the big banks, hedge funds, brokerage firms, stock promoters, and scam artists domestically and abroad. It's time for us to utilize the power of information and technology to inform each other and retaliate against those looking to take advantage. My recommendation is that it's probably best to avoid Chinese stocks completely. You should especially stay away from the low floaters that are thinly traded and easy to manipulate. I recently set a price target of $1.15 on BNSO and it's just about there. The EFUT price manipulated pump and dump will likely falter when their actual earnings are released.
The following are ways to avoid falling into this trap: Read all press releases meticulously, watch out for inexplicable price action or volume, avoid thinly traded low float stocks, and be weary of any company based outside of the U.S. especially China. Watch for suspicious market maker activity such as fake bid and asks, be weary of Twitter pumping and distorting, misleading or false PR's, unaudited earnings, and forward looking statements.
Another recent example of suspect dealings is the low float stock KBIO which was supposedly liquidating its assets and winding down operations as of November 13th. Less than a week later, a large stock purchase is announced. Today the company has announced a purchase of 1.2 million shares by Turing Pharmaceuticals CEO Martin Shkreli (the same guy who decided to charge $750 for one tablet of Daraprim). The stock has run from $2 to almost $20 after hours. It has probably destroyed many investors who sold their broken shares to Mr. Shkreli between 60 cents and $2.43. Do you think KaloBios Pharmaceuticals was not aware that this transaction was going to take place? I'll let you decide. This entire game is rigged for the insiders my friends. However, as a retail trader, you can certainly make a lot of money if you are on the right side of this racket. Educate yourselves on the prevalent scams that exist, cease being naive and gullible, and use this information to grow your account. Please my fellow traders tread carefully and always do your due diligence. Fraud is on the rise and it will likely only continue to get worse.