Problems in Chinatown (Part 2)
And launching StopNasdaqChinaFraud.com
Over the past two weeks, The Bear Cave has exposed a growing wave of U.S.-listed Chinese pump-and-dump schemes. Our first article warned of a “golden age of coordinated stock promotion,” and last week’s investigation, Problems at Pheton Holdings (PTHL), was followed by a ~95% intraday stock drop. Today, we dive deeper into the machinery behind these scams, share a crowdsourced database to track them in real time, and warn about six stocks currently being promoted in the stock manipulation schemes.
Central to many of the largest stock manipulation scams are spurious rumors that a large legitimate company will soon acquire or partner with the promoted Nasdaq-listed Chinese company.
In the weeks leading up to PTHL’s collapse, scammers circulated a PowerPoint that stated “Gilead Sciences will purchase a 30% stake in PTHL and take two board seats” and said the company “could receive a $60-80 million upfront payment for licensing radiotherapy technology from Gilead.” In reality, Pheton had declining revenues of less than $1 million, only ten employees, and no real potential for a major partnership. Below is a copy of the PowerPoint presentation used in the stock manipulation scheme.
Following the collapse, Pheton Holdings said it “categorically denies any involvement in, or knowledge of, any form of stock price manipulation.” The day after PTHL’s collapse, several entities based in the British Virgin Islands, owning stock worth hundreds of millions at the company’s pre-collapse peak, filed amended 13G ownership forms disclosing they had sold all their PTHL stock.
Following the collapse, one scam WhatsApp group claimed “a large amount of short-selling funds appeared, making it very difficult to raise the price.” Separately, scammers impersonating the FBI reached out to victims to investigate “a recent short-selling incident involving PTHL.”
Following their standard practice, the scammers encouraged investors who bought PTHL “to temporarily sell their PTHL and raise these funds to participate in the next value investment transaction.” The Bear Cave believes the stock manipulation groups encourage victims to sell the manipulated stock post-collapse so the scammers can re-buy the stock and repeat the pump-and-dump cycle with new investors in the future. Examples of companies reused in repeat pump-and-dump cycles include Picocela (NASDAQ: PCLA), Wellchange Holdings (NASDAQ: WCT), and Lixiang Education Holding Co (NASDAQ: LXEH).
The stock manipulation groups often impersonate real asset management firms and their specific employees. Other times, the scammers will create websites for fictitious financial firms, usually promoting new AI-based trading algorithms. The Bear Cave believes some of the websites used by the stock manipulation networks include:
Most of the website domains were registered within the last twelve months and all were registered using GNAME, a Singapore-based domain name registrar.
These groups operate primarily over WhatsApp and spend months building up rapport with members by recommending legitimate stocks, offering free portfolio reviews, and sharing general market insights. Below are two recent legitimate stock recommendations from F&C Assets.
Some groups offer members prizes, including premium mugs, iPhones, and luxury cars, for daily check-ins and sending screenshots of purchases following their stock recommendations.
A member of the F&C Assets team offered to send The Bear Cave a branded mug for our loyalty in following F&C’s recommended stock trades. To our surprise, a genuine branded F&C Assets tumbler arrived on our doorstep a few weeks later.
Below is a picture of the fictitious F&C Assets leadership team and the real branded tumbler mailed to The Bear Cave.
These stock manipulation groups are lucrative. A recent Wall Street Journal investigation highlighted that scammers made “over $480 million” from a pump-and-dump scheme on China Liberal Education Holdings (NASDAQ: CLEU) earlier this year. With dozens of these stock scams every year, the total stock manipulation revenue is likely approaching tens of billions annually.
These illicit profits finance a vast fraud machine including a constant refresh of deceitful brands, hundreds or thousands of WhatsApp groups, polished educational content, real loyalty gifts, FaceTime or photo verification to properly gatekeep “VIP” trading groups, and personalized chats and paid aids for an endless flow of victims.
Regulators struggle to track these schemes because the manipulation is distributed across hundreds of WhatsApp rooms and dozens of companies.
To fight back, The Bear Cave is launching StopNasdaqChinaFraud.com, an open searchable database where anyone can share screenshots from these stock manipulation groups.
With enough traction, the database will provide a near real-time look into which stocks are being manipulated, the promotion tactics, and the contact details and branding scammers use, giving regulators a clearer path to shut them down. Learn more in our launch video below.
Here is what one victim of the PTHL stock manipulation scam told The Bear Cave, regarding how the scams work over WhatsApp:
“Based on my personal experience, I believe the scammers are following a highly coordinated multi-step fraud strategy designed to build trust, manipulate trading behavior, and extract capital in a systematic way. Here’s a breakdown of the 7-step process I encountered:
1. Initial Trust-Building: They recommend a reliable and well-known stock that delivers quick returns. In my case, it was SOFI, where I saw a ~10% profit within just a few days.
2. High-Gain Promise: After gaining confidence, they recommend an obscure penny stock with promises of 150–300% returns in 15–20 trading days. This is where PTHL was introduced to me.
3. Controlled Exit: To solidify credibility, they advise selling the position early to lock in 15–20% short-term gains, creating the illusion of risk-managed profitability.
4. ‘Insider’ Opportunity Pitch: They then share supposed insider news — including claimed contact with the company’s board and financial team — and urge re-entry with larger capital, presenting it as a ‘once-in-a-lifetime’ opportunity.
5. The Collapse: At a predetermined time, they short-sell the stock sharply, triggering a catastrophic drop (in PTHL's case, around 96% in a matter of hours) that even stop-losses can’t protect against. This wipes out principal investment.
6. Disband & Distract: The group is dismantled, but they continue reaching out to victims individually, requesting account proofs (Saxo, etc.) with the promise of 80% reimbursement.
7. Rinse & Repeat: Once investors show interest in reimbursement, the cycle starts over — they propose a new ‘trust-building’ trade. In my case, they are now recommending CAKE as step 1 of a new setup, and have hinted at another upcoming trade (what they’re calling Star 8). The PTHL trade was pitched as their ‘Star 7’ trade, and I strongly suspect this is part of a long-running fraudulent campaign with previous iterations.”
In short, scammers build trust recommending legitimate stocks, lose their victims millions recommending a manipulated stock, and attempt to rebuild trust with new recommendations. A rinse and repeat cycle done almost exclusively over WhatsApp.
The Bear Cave has identified six companies we believe are next in line in this overseas stock manipulation scam. They are: