The U.S. Department of Justice has charged two individuals in connection with a sophisticated $110 million stock fraud that targeted thousands of investors, including many in the United Kingdom. The scheme allegedly involved artificially inflating the share price of Ostin Technology Group by over 1,000% before a sudden collapse wiped out investor funds.
Investigators state the operation used social media and encrypted messaging apps like WhatsApp to impersonate legitimate U.S. investment firms, luring savers into what is known as a "pump and dump" scheme. The case highlights the growing risks of investment scams promoted through online platforms.
Key Takeaways
- The U.S. Department of Justice has charged Ostin Technology Group's co-CEO and a financial adviser with a $110 million fraud.
- The scheme allegedly inflated the company's stock price by 1,075% using a social media campaign.
- Scammers impersonated legitimate U.S. investment firms and used WhatsApp to contact potential victims.
- Thousands of UK investors are believed to have suffered significant financial losses after the stock's value collapsed by 94% in a single day.
- Nasdaq has suspended trading of Ostin Technology Group (OST) shares following the indictment.
DOJ Uncovers Alleged $110 Million Fraud
Federal prosecutors in the United States have brought charges against Lai Kui Sen, the co-chief executive of Ostin Technology Group, and Yan Zhao, a financial adviser. The indictment, announced on September 10, accuses them and 15 unnamed co-conspirators of orchestrating a large-scale securities fraud.
According to the Department of Justice (DOJ), the individuals generated more than $110 million in illegal profits. They allegedly defrauded investors by manipulating the market for shares of Ostin Technology Group (OST), a company listed on the Nasdaq stock exchange.
The core of the allegation is a classic "pump and dump" strategy. Prosecutors claim the accused first acquired a majority of the company's shares at deeply discounted prices and then launched a deceptive promotional campaign to drive up the price before selling their holdings at the peak, causing the stock to crash.
What is a Pump and Dump Scheme?
A pump and dump scheme is a form of securities fraud that involves artificially inflating the price of a stock (the "pump") through false and misleading positive statements. Once the price is high, the perpetrators sell their own shares (the "dump"), causing the stock price to plummet and leaving other investors with worthless stock.
How the Scheme Targeted UK Investors
The operation relied heavily on social media and encrypted messaging to reach a wide audience. One victim, a 76-year-old retired professional from North Yorkshire identified by the pseudonym Steven Peters, described how he was drawn in after clicking a Facebook advertisement for AI-powered investment tips in May.
Shortly after submitting his details, he began receiving WhatsApp messages from an individual calling herself "Jennifer Mitchell." This person claimed to represent Reinhart Partners, a legitimate U.S. investment management firm based in Wisconsin.
In reality, both the firm and its employee were being impersonated. According to the law firm Richardson Hartley Law, which is representing victims, scammers also impersonated at least two other U.S. firms: Edgewood Management and Elgethun Capital Management.
"I checked them out and everything seemed fine," Peters stated. "They were on LinkedIn, it was a legitimate investment house."
This false sense of security was a key part of the deception. The scam was designed so that investors like Peters used their own trading accounts, creating the illusion of control. "That's why it’s such a marvellous scam, isn't it?" he reflected. "Because you're not sending them any money."
The Rise of Social Media Scams
Encrypted messaging apps have become a primary tool for investment fraud. A report from the digital bank Revolut found that 64% of UK investment scams reported to them last year originated on platforms like WhatsApp and Telegram.
The Anatomy of the Stock Price Manipulation
Before April 2025, Ostin Technology Group was a little-known company. Based in the Cayman Islands with operations in China, it manufactures display modules for electronics. Its latest financial filings showed sales of $57.5 million and an operating loss of $10.3 million.
The "Pump" Phase
The DOJ alleges that beginning on April 15, the co-conspirators began their coordinated effort. They allegedly acquired a large volume of OST shares for a fraction of the market price. Simultaneously, the social media promotion began.
Investors were sent fabricated research reports promising significant returns. One such report, falsely attributed to Reinhart Partners, set a target price of $20 to $25 per share. This was justified with a fake announcement of an impending merger with Universal Display Corporation, a legitimate U.S. company.
This campaign successfully drove up demand. Between June 1 and June 25, OST's share price surged from $5.72 to $9.02, an increase of 58%. The stock became one of the most-traded on Hargreaves Lansdown, the UK's largest investment platform, for three consecutive weeks in June.
The "Dump" and Collapse
While unsuspecting investors were buying into the hype, the DOJ claims the conspirators were selling their shares at the inflated prices. By June 25, Steven Peters had invested $21,486, believing the promised merger would yield a substantial profit.
However, the merger was a fabrication. With no real news to support the high valuation, the stock price collapsed. The company's market value plummeted by $950 million, a 94% loss, in a single day.
Peters sold his shares for just under $1 each, losing approximately $20,000. He is believed to be one of thousands of victims in the UK alone.
The Aftermath and Regulatory Action
Following the DOJ's charges, the Nasdaq took action. On September 12, trading in OST shares was officially suspended pending the release of additional information from the company.
Martin Richardson of Richardson Hartley Law confirmed the widespread impact on UK investors. "As soon as the share price plummeted we started to get calls and inquiries from investors who said that they had been scammed," he said. Richardson suggested the number of UK victims is likely in the thousands, resulting in "financial devastation" for many.
Even after losing his investment, Peters reported that he continued to receive messages from the fake "Jennifer Mitchell," attempting to lure him into new investment opportunities.
Ostin Technology Group, Reinhart Partners, Edgewood Management, and Elgethun Capital Management did not respond to requests for comment on the matter.
