Eastern District of Virginia – Two Chinese nationals are under federal indictment and face up to 25 years in prison for their alleged roles in a sophisticated “pump-and-dump” stock fraud scheme targeting U.S. investors.
The case involves manipulation of shares of Ostin Technology Group Co. Ltd. (OST), a Cayman Islands-based company publicly traded on NASDAQ, with principal operations in China. The indictment alleges that the conspirators reaped more than $100 million illegally by artificially inflating OST’s stock price.
This complex securities fraud highlights ongoing risks U.S. investors face from foreign actors exploiting the American financial markets. Federal authorities emphasize their commitment to protecting investors and maintaining market integrity as the investigation unfolds.
Details of the Alleged Pump-and-Dump Scheme
The indictment, unsealed on Thursday in Virginia’s eastern district, charges Lai Kui Sen and Yan Zhao with masterminding a coordinated scheme between April and June to manipulate OST’s stock price. Zhao, who also operates under aliases such as Hank Shi and Hank Shu, and Sen, who serves as OST’s co-CEO, allegedly:
- Secured over 70 million Ostin Technology shares through non-bona fide transactions, sometimes without any payment to OST.
- Launched an orchestrated social media campaign to artificially inflate OST’s share price and trading volume.
- Enabled retail investors to receive heavily discounted shares, which were then sold off in a coordinated manner.
- Facilitated illegal brokerage accounts for these investors to execute the fraudulent sales.
As a result, the fraudulent activity generated over $110 million in illicit profits, with OST’s stock plunging by over 94% on June 26, wiping out approximately $950 million in market capitalization and causing significant losses to unwitting investors.
Law Enforcement Response and Ongoing Actions
Federal agencies acted swiftly after the scheme was uncovered. To date, the U.S. Department of Justice (DOJ) has seized nearly $10 million from accounts linked to the defendants. Authorities made clear their zero-tolerance stance on market manipulation, especially when involving foreign actors targeting American investors.
“Protecting the integrity of our financial markets remains a top priority,” said Erik S. Siebert, U.S. attorney for the eastern district of Virginia.
“If you seek to manipulate U.S. markets for personal gain, the FBI will pursue you even if you’re operating halfway around the world,” stated Special Agent in Charge Reid Davis of the FBI Washington Field Office’s Criminal Division.
The Securities and Exchange Commission’s (SEC) Office of Inspector General also vowed relentless investigative oversight to prevent and punish false filings and fraudulent behavior.
“Comprehensive investigative oversight to protect investors, the global markets, and the operational integrity of the SEC’s programs, systems, and operations is a top priority for our office,” said SEC Inspector General Kevin Muhlendorf.
Implications for U.S. Investors and Market Security
The case demonstrates the vulnerability of U.S. financial markets to sophisticated scams executed with international reach. Assistant Director Jose A. Perez of the FBI’s Criminal Investigative Division emphasized the broader impact:
“Securities fraud by foreign actors not only exploits fair investment practices, but also defrauds American investors and harms U.S. markets.”
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The defendants face charges of conspiracy to commit securities fraud and wire fraud, as well as individual counts of securities and wire fraud. Sentencing guidelines place potential prison terms between 20 to 25 years, with final judgments made by federal courts.
Key Facts at a Glance
- Defendants: Lai Kui Sen (co-CEO OST) and Yan Zhao (financial adviser)
- Scheme period: April to June 2025
- Alleged profits: Over $110 million
- Stock value loss: Over 94% of OST market cap, about $950 million, on June 26
- Asset seizure: Nearly $10 million recovered by DOJ
- Maximum prison terms: 20–25 years per charge
- Associated tactics: Non-bona fide stock transfers, fraudulent social media campaigns, use of multiple brokerage accounts
For more details on this ongoing case, visit the official source.
What Does This Mean for Investors?
This indictment serves as a reminder for investors to exercise caution and perform due diligence when engaging with foreign stocks, especially those promoted via unverified channels. Federal agencies continue to bolster detection and enforcement efforts to prevent such abuses.
What do you think about this discovery? Have you ever invested in foreign stocks? Share your thoughts in the comments below!