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In recent months, a disturbing trend has emerged in the financial markets: obscure Chinese penny stocks experiencing sudden, inexplicable surges in price. While such movements might tempt some investors with the prospect of quick gains, it’s crucial to understand the underlying causes—and the significant risks involved.

The Scheme Unveiled

According to a detailed report by Aya Wagatsuma for Yahoo Finance, hackers have been orchestrating a sophisticated scheme involving the hijacking of online brokerage accounts in Japan. These compromised accounts are then used to purchase large volumes of thinly traded stocks, including many Chinese penny stocks, artificially inflating their prices. Once the prices are sufficiently pumped, the perpetrators sell off their holdings at these elevated levels, profiting at the expense of unsuspecting investors.

The scale of this operation is staggering, with fraudulent trades amounting to approximately ¥100 billion (around $700 million) since February 2025. Major Japanese brokerage firms, such as Rakuten Securities and SBI Securities, have reported unauthorized trading activities on their platforms. In response, some firms have halted buy orders for certain stocks to curb the manipulation.

The Human Cost

The victims of these hacks are often everyday investors who find their accounts drained or used for unauthorized trades. One 41-year-old part-time worker discovered that her Rakuten Securities account had been used to purchase Chinese stocks, resulting in a loss of about 12% of her holdings. Despite reporting the incident, she faced challenges in seeking recourse, with both the brokerage and local authorities providing limited assistance.

Another investor lost approximately ¥50 million when his account was compromised and used to buy stocks on margin. When the prices of these stocks plummeted, he was forced to liquidate his holdings to cover the losses, further exacerbating his financial setback.

How the Hackers Operate

Cybersecurity experts believe that the hackers employ techniques such as “adversary-in-the-middle” attacks and the use of infostealers. These methods involve creating fake websites or malware to capture users’ login credentials and session data. Once the hackers gain access to a brokerage account, they can execute trades without the account holder’s knowledge.

A Cautionary Tale for Investors

The current environment serves as a stark reminder of the importance of due diligence and skepticism, especially when dealing with volatile, low-volume stocks. While the allure of quick profits can be tempting, it’s essential to recognize the signs of market manipulation and avoid getting caught in schemes that can lead to significant financial losses.

Disclaimer: This is AI generated content. This blog post is for informational purposes only and does not constitute financial advice. Investing in stocks involves risks, and individuals should conduct their own research or consult with a financial advisor before making investment decisions.

Source:

https://finance.yahoo.com/news/hackers-manipulate-markets-700-million-141234302.html