The finfluencer Gabriel Govinda, also known as ‘Fibonarchery’, was earlier this month sentenced to two and a half years imprisonment after pleading guilty to 23 charges of manipulating shares listed on the Australian Securities Exchange, and to 19 charges of illegal dissemination of information regarding set manipulation.

Sarah Court, Deputy Chair of the Australian Securities and Investments Commission (ASIC), said: “Mr Govinda used a 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.”

“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.”

Sarah Court, Deputy Chair, ASIC

The Court found that Govinda’s posts about the manipulated market activities on HotCopper breached s1041D of the Corporations Act. Which, according to the ASIC, is the first time a person has ever been sentenced under this provision.

Govinda was however immediately released on a five-year recognisance in the amount of A$5,000 ($3,395.89) and fined A$42,840 ($29,080.75).

13 trading accounts

To manipulate the market and the share price of 20 different listed stocks, Govinda used a total of 13 different share trading accounts that were held in the names of friends and relatives. Between September 2014 to July 2015, he managed to cheat the market, contrary to s1041B of the Corporations Act, by:

• performing wash trading between accounts he controlled; and
• using fake, ‘prop’, or ‘dummy’ bids to faulty increase the perceived demand, and ultimate price, for listed stocks.

“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,” Court added.

Pump and dump

Govinda was also illegally spreading information about his wash trades and dummy bids on HotCopper to increase the share price – and then selling the stocks at a higher price.

Through the pump and dump approach, he managed to manipulate smaller and less expensive companies that were listed on the exchange, and then benefit from the price increases.

While searching Govinda’s premises in 2015, the ASIC also found a notepad with details of his actions to use HotCopper to promote his market manipulation. The notes 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.”
• “Sell to self to create illusion of volume.”  
• “Sell stock down to yourself then buy stock up to yourself. Buy cheap, make it expensive again, sell to others.”

Since the March 2019 reforms to increase penalties under the Corporations Act, the maximum penalty for offences like these have now increased to 15 years in prison. Govinda, who performed the conduct before that timeline, was therefore not affected by the longer prison sentence.

Social media sweep

Earlier in April, The Australian Competition & Consumer Commission (ACCC) also released a new report on social media services, which followed a sweep on social media influencers to identify misleading testimonials and endorsements by them.

The ACCC monitored a mix of 118 influencers across platforms such as Instagram, TikTok, Snapchat, YouTube and Facebook, and Twitch, and found that 81% of the posts were concerning and in need of follow-up action. The majority of the concerns were related to not disclosing payments or gifts for advertising.

“The number of tip-offs reflects the community concern about the ever-increasing number of manipulative marketing techniques on social media, designed to exploit or pressure consumers into purchasing goods or services,” said ACCC Chair Gina Cass-Gottlieb.

Scams are rising

According to the ACCC, Australians lost over A$80m ($53.43m) to social media scams, up from A$56m ($37.40m) in 2021 and A$27m ($18m) in 2020.

“It is clear that social media companies are not doing enough to stop their own users from falling victim to scammers on their platforms, especially as we understand only a fraction of people scammed ever report it,” Cass-Gottlieb added.

In 2021, 28% of 15–21-year-olds follow at least one finfluencer on social media, according to the ASIC. About 64% of young people also reportedly changed at least one of their financial behaviours as a result.