B.C. Securities Commission warns of fake-news promotions tied to possible pump-and-dump tactics

The Story

The B.C. Securities Commission says it has identified suspected fraud that uses an international network of fake news websites to promote shares of B.C. public companies, and it issued an investor alert on Oct. 15 to warn investors.

Director of Enforcement Doug Muir said the commission came out with the alert because of the articles it has been seeing on those sites and because “there seems to be some concerted effort that’s addressing B.C. companies.” He added that the commission is concerned investors “may be misled by these articles that are pretending to be journalistic articles, but are not,” and that the promotions could be part of a pump-and-dump scheme.

According to the commission’s alert, the misleading promotions may encourage investors to buy company stock based on information the commission describes as misleading, including claims of 1,000 per cent returns. The commission says pump-and-dump schemes often involve fraudsters obtaining large tranches of cheap shares—sometimes through nominees—then promoting the shares while concealing their involvement. When buying increases, the share price rises, and fraudsters attempt to sell at or near the peak; when demand fades, the price can fall sharply, leaving investors with losses.

The commission said investors are being targeted through ads that appear on Google search results. It stated that, according to the Google Ads Transparency Center, the following firms are listed as the “verified advertisers” of the campaigns: Advertising Services Worldwide Inc. in the British Virgin Islands; Island Marketing Limited in the Cayman Islands; Galerna Logistics Transport Corporation in Panama; and Oxbridge Media s.r.o. in Slovakia.

The commission said the promotional articles and websites are presented in a news-style format that makes it difficult for investors to distinguish promotional content from independent journalism. It also said the sites include other articles it describes as AI-generated, which it says gives the websites a veneer of authenticity.

The commission identified four B.C. companies that appear to have been targeted: Bighorn Metals Corp. (CSE:HRNY), Clara Technologies Corp. (CSE:CLTE), Leviathan Metals Corp. (TSXV:LVX), and Noveris Health Sciences Inc. (CSE:NVRS). The commission said it is not alleging that any of the companies named on the websites, or any of their executives, were involved in, authorized, or had knowledge of the promotional activities.

In related public responses, Bighorn issued a news release on Sept. 28 stating that at least two articles bearing a copyright notice identifying Advertising Services Worldwide Ltd. made statements “that are inconsistent with the company's public disclosure and may mislead investors.” Noveris, meanwhile, issued a statement after trading was halted under a March 25 order citing “unexplained and unusual fluctuations in the volume of trading in, or market price, of the company’s shares traded on the CSE.” Noveris said it “has not authorized, commissioned, or otherwise been involved in the creation or distribution of an article” found on TheTimesFinancial.com, which is associated with Advertising Services Worldwide Inc. Noveris also said one article claimed the company had U.S. Food and Drug Administration (FDA) registration when it is not pursuing it.

Muir said investigators often face challenges in identifying the people behind schemes because bad actors may layer the operation so that those benefiting from a pump and dump—and holding shares to sell—can be “anywhere in the world.” He said the commission has increasingly focused on “disruption” because finding someone to hold accountable across borders and rules can be “very challenging and time-consuming.”

He also said the commission has regulations requiring clear and conspicuous disclosure of online and social media marketing materials involving B.C.-based public companies. Muir said, in this case, disclosures were present on some articles but were placed “at the bottom of the page and in very small font,” which he said is “intentionally buried” so investors may not see it.

Muir said the commission’s alert is intended to support investor due diligence, adding that investors should ask, “why is this being published? Who is behind it? And what are they pushing me to buy this stock?” He said investors should consider information the companies have produced, including that they “are not part of these promotions,” and weigh all available information before making decisions.