In 2018, Mr. Wang from Shandong found a professional stock consulting company online and planned to learn how to trade stocks. He thought that following their recommendations could make money, but he didn't expect to encounter a stock market "black mouth". They didn't recommend high-quality stocks or potential stocks, but instead deceived Mr. Wang and others into buying the stocks they manipulated at high prices and obtaining huge illegal gains in a short period of time... Today, let's follow CCTV reporters to reveal the "black mouth" money making tactics in the stock market.

How to lure investors into the market by manipulating stocks for profit?

At the beginning of 2018, Mr. Wang, who had just started trading stocks, was searching for relevant information on the internet when he came across a column on a video platform that talked about stock reviews. Here, there was a group of so-called stock recommendation experts who shared their knowledge and advice on stock selection and buying every day, and said they could lead people to trade stocks together. After following for a period of time, Mr. Wang found that the stocks recommended by the other party did indeed have good returns, so he contacted them with a try and see attitude.

Mr. Wang, the party involved: I called them several times and found them quite professional and formal. So, I transferred over 20000 yuan to the designated account of the company and signed a commission contract through the company's designated website.

After signing the commission contract, the company stated that they had arranged for a staff member to contact Mr. Wang. As a result, Mr. Wang began to follow the advice given by the other party and bought a small amount of stocks to test his luck. A month later, he did indeed receive some returns.

Mr. Wang, the party involved: At the beginning, he recommended stocks to me and I earned a little, not much, totaling over 10000 yuan.

After investing for a period of time, Mr. Wang felt that the stocks recommended by this company were indeed good, and in order to earn more profits, his investment was gradually increasing. On March 27, 2018, his assistant recommended a stock to him, and with his previous experience of making money, Mr. Wang firmly believed in it and prepared to invest even more. After the stock market opened on March 28th, Mr. Wang bought over 1.5 million yuan worth of stocks in one go. But the next day, the trend of this stock exceeded his expectations.

Mr. Wang, the party involved: When the trading was about to close at noon the next day, this stock hit the limit down. Afterwards, I quickly sold it and lost over 300000 yuan in just two days.

Mr. Wang is a bit strange. He bought and sold stocks completely according to the instructions of these professionals. Why did he lose so much this time? In fact, the so-called stock recommendation expert recommending Mr. Wang's stock was premeditated for a long time, and Mr. Wang had already fallen into the trap set by them. Apart from Mr. Wang, many other investors have also experienced the same situation. They all followed the advice of some so-called stock recommendations and bought the same stock on March 28, 2018. After buying, the stock immediately fell to the limit and froze.

The experiences of these investors quickly caught the attention of law enforcement agencies, which may involve a case of manipulating the securities market. Among them, the so-called "experts" who recommend stocks to people are called "black mouthed" in the stock market. What role do these people play in such cases? What kind of criminal gang is hidden behind this case of manipulating the securities market?

What gangs are hidden behind the case of manipulating the securities market

After preliminary investigation, the investigating unit has determined that the behavior of this criminal gang violates Article 182 of the Criminal Law of the People's Republic of China and is suspected of manipulating the securities market.

In 2019, the Securities Law of the People's Republic of China was revised, combined with the practice of registration system reform, to further clarify the responsibility boundaries and increase the punishment for securities illegal activities. The procuratorial organs are also exploring how to crack down on securities crimes and ensure the healthy development of the financial market within the framework of relevant laws.

Zhang Xiaojin, Director of the Fourth Procuratorial Department of the Supreme People's Procuratorate: Such manipulative behavior, including all stock market manipulation, not only damages the legitimate rights and interests of investors, but also infringes on the overall financial market management order. At the same time, the confidence of our entire capital market will also be greatly impacted, thereby affecting the important role of the entire capital market in the development of the national economy.

The Ministry of Public Security has designated the Zibo Public Security Bureau in Shandong Province to initiate an investigation, while the Zibo People's Procuratorate has intervened in advance to guide the public security organs in investigating and collecting evidence. After investigating the relevant data provided by the Shanghai Stock Exchange, investigators found that since December 2017, as many as 55 stock market accounts have been frequently buying and selling a large number of implicated code stocks, and these accounts have a phenomenon of trading convergence (trading convergence refers to the high overlap of multiple stocks traded by certain personal or institutional accounts, and buying and selling at the same time during similar time periods, that is, the stock varieties and trading times traded by certain accounts are basically the same).

The investigators analyzed that these accounts are likely controlled by a criminal gang suspected of manipulating the securities market. Subsequently, after investigating the abnormal trading of the stocks involved, a criminal gang led by Zheng surfaced.

After investigation, it was found that Zheng and others set up multiple trading points and formed trading teams in Zhejiang, Chongqing and other places within 77 trading days from December 6, 2017 to March 30, 2018. They opened 55 accounts and successively opened positions, continuously buying and selling the stocks involved in the case. During this period, this criminal gang held up to 36.48% of the actual outstanding shares involved in the case, which seriously affected the trading price and volume of the stock. Their behavior has been suspected of the crime of manipulating the securities market.

After investing a large amount of money to purchase the stock, Zheng and others must cash out and sell it at a high point to make a profit, which means that someone needs to buy their stock at a high point. So, how did the criminal gang involved in the case make others willingly take over such a large number of stocks in their hands?

After investigation, it was found that there were also people like Cao, known as the "black mouth" of the stock market, in this criminal gang. They appeared on online platforms and social media as stock recommendation masters, using the selling point of recommending stocks and making money to attract ordinary investors.

After gaining the trust of stock investors, this group of "black mouthed" instigated retail investors, including Mr. Wang and Mr. Zhu, to buy the stocks involved in the criminal gang's pending orders and sell them according to the plan of Zheng and others from March 28, 2018. Afterwards, Zheng paid a promotion fee of 12 million yuan to Cao and others. After receiving instructions from Zheng, Cao and others immediately notified their respective downlines through WeChat, and the downlines notified retail investors to purchase the stocks involved in the case.

In addition to recommending manipulated stocks to specific investors layer by layer, Zheng and others also paid a promotion fee of 6.5 million yuan to a securities company. The so-called "senior analysts" gave live lectures on stock knowledge through various online platforms, and then recommended the involved stocks and buying opportunities to unspecified investors in society. By using these methods, by March 30th, Zheng and others had basically sold their stocks worth 170 million yuan. From the beginning of trading to the end of selling, in less than four months, Zheng and others illegally profited more than 50 million yuan.

The existence of "black mouth" makes the case more covert

In June 2020, the People's Procuratorate of Zibo City prosecuted Zheng and others on suspicion of manipulating the securities market in accordance with the law. In December of the same year, the Intermediate People's Court of Zibo City sentenced Zheng and 14 others to imprisonment ranging from five years and six months to one year for manipulating the securities market. All defendants were fined and their illegal gains were confiscated.

Nie Limin, Deputy Prosecutor General of the People's Procuratorate of Zibo City: In this case, the criminals took advantage of the blindness of some investors and disseminated information similar to "if there are market makers in a certain stock, the stock will skyrocket" through media such as WeChat groups, QQ groups, and stock bars, attracting retail investors who do not know the truth to accept the offer, and inducing a large number of people who originally had no investment intention or risk tolerance to invest directly, ultimately suffering huge losses.

The investigating prosecutor introduced that in this type of crime, the "black mouth" in the stock market plays a very critical role. Some of them even come from a legitimate stock consulting company and use their identities to collude with criminals such as trading and capital allocation, jointly manipulating the securities market and infringing on the legitimate rights and interests of investors. Moreover, the existence of the "black mouth" in the stock market gives the case a certain degree of concealment.

Zhang Xiaojin, Director of the Fourth Procuratorate of the Supreme People's Procuratorate: (Blackmouth) Usually within a certain range, he has a certain degree of influence, and it is precisely by using his influence and the trust of the people in his professional knowledge that it is difficult for Lao Bai to understand his connection with each stock through his recommendation. According to the volatility of the stock market, there are losses and profits, which is a common situation. Therefore, sometimes it is also difficult to establish such a direct connection between the losses or profits and the stock recommender.

Although the stock market carries risks and investments need to be cautious, unlike normal investment profits and losses, in such cases of manipulating the securities market, "black mouthed" individuals fabricate and spread false or misleading information to attract investors to buy high priced stocks from criminals at high prices, resulting in losses for investors. The crime of manipulating the securities market is highly organized and harmful, and is one of the key illegal crimes that the procuratorial organs focus on cracking down on.

III. Conclusion Tip

Investors should be wary of "stock market black mouth" behavior, choose legitimate institutions in the investment process, adhere to rational investment, and enhance their risk prevention awareness and self-protection ability to guard against being deceived.

Content integration from Shenzhen Stock Exchange official website, CCTV website, Sina Finance