The Justice Department has seized $214 million tied to an alleged international pump-and-dump scheme targeting retail investors, many of whom were misled by scammers posing as investment advisors on social media.
The case serves as a stark reminder for RIAs and wealth advisors to remain vigilant as social media continues to be exploited in sophisticated frauds.
According to the DOJ, the alleged perpetrators—operating primarily out of China, Taiwan, and Malaysia—impersonated legitimate financial professionals, including registered investment advisors, to gain the trust of investors in the U.S. and abroad.
They promoted shares of a Cayman Islands-based company, Chinese Liberal Education Holdings (CLEU), which is listed on the Nasdaq. Promising high returns and leveraging the credibility associated with U.S.-based advisory firms, they encouraged victims to buy into CLEU.
The FBI’s ongoing investigation seeks to identify hundreds of victims, many of whom were lured through social media platforms and encrypted messaging apps. The fraudsters allegedly engaged in coordinated promotion and trading activity that artificially inflated CLEU’s share price.
Once the price surged, the scammers liquidated large positions—selling millions of shares—reaping massive profits before the stock collapsed.
Seven individuals have been charged with wire and securities fraud. Arrest warrants have been issued, though none are currently in U.S. custody. The DOJ reports that between them, the defendants sold 3.7 million to 9.3 million shares each, with profits totaling over $200 million.
Meanwhile, roughly 600 U.S. investors and others worldwide suffered steep losses, especially after CLEU disclosed its true outstanding share count in an SEC filing. The company’s stock plummeted nearly 99% following the announcement.
Wealth advisors should take note of the DOJ’s and SEC’s emphasis on red flags, such as unsolicited stock tips, promises of high returns with minimal risk, and impersonation of legitimate advisors.
This case underscores the necessity of reinforcing client education around social media-driven scams and verifying any investment opportunity’s source, particularly when clients are approached outside formal advisory channels.
The DOJ is now pursuing forfeiture proceedings to recover and return seized funds to defrauded investors. CLEU has not issued a public comment in response to the allegations.
As fraud tactics become more elaborate, the burden grows on financial professionals to proactively protect their clients and their firm’s reputation. This case reinforces that due diligence, investor awareness, and active fraud monitoring must remain top priorities in an increasingly digital advisory landscape.
