Illegal Stocks Scam: SECP Nabs “Social Media Finance Guru”, For Rs58 Million Fraud

** UPDATE 2: After an initial silence later to break the deadlock and reveal the name of one, Mir Muhammad Ali Khan (MAK), it seems that the identification and report by the SECP naming MAK was incorrect. When the alleged perpetrator was supposed to be arrested, he was posting updates denying all claims on his public Facebook page. As this evidence presented, it leaves little room for doubt that the SECP release has been false.

At PakWired, we pride in our high standards and as a regular practice, verify the information before publishing. The story underneath was based upon a press release issued by the Security & Exchange Commission of Pakistan, SECP – a state organisation and Government of Pakistan’s finance regulatory authority. We condemn the factual inaccuracy of the information released by the state agency and apologize to Mr Mir Muhammad Ali Khan.

** UPDATE: In a press conference this evening at the Securities and Exchange Commission head office in Karachi, Chairman SECP Zafar Hijazi has finally revealed the identity of the accused fraudster in the illegal stock scam to be that of Mir Muhammad Ali Khan.

In his statement, the SECP Chairman said that Mir Muhammad Ali Khan, popularly known as MAK at the social media, was being monitored by the SECP regulator for the last two years and investigated under Section 139 of the Securities Act, 2015.

Hijazi went on to explain the operational strategy behind MAK’s alleged fraud scheme, saying that the person accumulates a stock from the equity market and subsequently starts posting his forecast on Facebook, where he has a massive following. He goes on to propose a target price – a price the stock is expected to reach in the near future. He goes on to re-post the same script, thereby impressing novice investors to follow his advice.

After providing examples of few of MAK’s alleged recent scams, SECP Chairman announced that MAK’s strategy is in violation of Sections 134 & 136 of the Securities Act, 2015 and accordingly penal provisions of Section 159 of the Securities Act, 2015 are proposed to be invoked against him. The SECP has filed a criminal case against MAK in a court of law on Tuesday, the SECP chairman further notified.**

Securities and Exchange Commission of Pakistan (SECP) has arrested a self proclaimed social media finance guru on the charge of defrauding investors. The man has been arrested for maintain an illegal racket and using unethical practices to dupe unknowing investors. The total amount he has scammed, has been estimated to be in the range of Rs58 million.

The commission released a press statement on Monday, claiming:

“In the wake of a sophisticated surveillance operation and a detailed investigation, the SECP has been able to unearth and act against a financial cyber crime. A self-styled stock market guru who gave self-serving investment tips to the public on Facebook has been caught red handed by the SECP”

Also Read: Rs7 Billion Scandal Jolts PSX, Authorities Moved to Take Serious Action

It was only late last month when an SECP official had announced, describing the legal status of such practices:

“Behaving like stock market gurus and making suggestions about investments are illegal. This is a form of manipulation called inducement, which is a crime under the Securities Act 2015.”

There will also be further investigation into the matter and more arrests may be made, shared the SECP spokesperson. The investigation will now be expanded further to see other people who are utilizing similar methods.

What is the ‘Pump and Dump’ method?

Also Read: Chairman SECP Advises Caution at Investors’ Free Flowing Funds in The Stock Market

‘Pump and Dump’ method is a simple technique used by unethical brokers and financial market experts. The technique involves using personal investment to change buyer behavior. An influential broker and investor can buy shares of a company to temporarily inflate the share price. The broker may then influence other people to buy shares of the same company at a higher price dumping all their own shares. This leads to a quick profit for the broker but long term problems for the investors who is unwilling end up making dead investments.

In order to make long term profits, the same strategy can be repeated multiple times before disappearing completely.

New Challenges for SECP

The recent surge in social media popularity and usage has created many further avenues for scammers. The social media footprint has increased, however, awareness about the possible risks hasn’t spread properly. The lure to make quick and easy money and inability to separate scams from real is a major problem for new internet users. The SECP has maintained that it is willing to align itself in modern times and meet the new challenges.

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