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The Australian corporate regulator has put ‘finluencers’ on notice after successfully prosecuting Gabriel Govinda, known by his online followers as Fibonarchery, on market manipulation charges that involved a ‘pump and dump’ strategy on ASX-listed stocks.
Govinda, who spruiked the 'penny' stocks on the popular HotCopper forum, was sentenced by the Melbourne County Court to two-and-a-half years imprisonment and fined $42,840 after pleading guilty to 23 charges of manipulating the shares as well as 19 counts of illegal dissemination of information relating to the market manipulation.
Govinda, who was the first person to be sentenced under the relevant section of the Corporations Act, was immediately released on a $5,000, five-year recognizance.
The Australian Securities and Investments Commission (ASIC) brought the charges against Govinda after investigating his market manipulation of 20 listed stocks between September 2014 and July 2015.
Had the offences occurred after March 2019, he would have faced up to 15 years imprisonment as the penalties have since been increased.
The court heard that Govinda used 13 different share trading accounts, held in the names of friends and relatives, but which he controlled and used ‘dummy’ bids to increase the perceived demand and price of these stocks. This is commonly known as wash trading.
Govinda also promoted the shares on HotCopper under the Fibonarchery handle, with the court finding that this activity was in breach of Section 1041D of the Corporations Act.
ASIC deputy chair Sarah Court says Govinda used the social media forum ‘as an integral part of his market manipulation’.
“He promoted certain shares that he had an undisclosed interest in, and which he had manipulated, with a view to selling out at a higher price,” she says.
“Individuals who look to social media, whether that be online forums or via platforms such as Instagram and Facebook, to promote stocks or financial products should take notice of today’s court decision.
“Finfluencer conduct, whether by using social media to manipulate the market, using a platform to profit from promoting manipulation done by others, or to promote financial products you are not licensed to promote, can result in serious consequences.”
ASIC says Govinda illegally disseminated information about his wash trades and dummy bids on HotCopper, looking to pump up the share price before dumping the shares at a higher price.
An ASIC raid on Govinda’s home in 2015 uncovered a notepad which detailed in simplistic terms his master plan to use HotCopper to promote his market manipulation.
It read: “Buy big parcels of small cap cash backed resource shares at reasonable price, alert H.C Daytraders to the action, sell to them at higher price at end of day.”
The note further read: “Sell to self to create illusion of volume” and “sell stock down to yourself then buy stock up to yourself. Buy cheap, make it expensive again, sell to others.”
The successful prosecution is the latest in a crackdown by ASIC on social media finfluencers, including the recent banning by the Federal Court of Tyson ‘ASX Wolf’ Scholz from operating a financial services business.
The court found that Scholz, who promoted his lavish lifestyle to 20,000 Instagram followers, had contravened the Corporations Act by engaging in financial services without an Australian licence to do so between March 2020 and November 2021.
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