Conviction of ‘finfluencer’ Fibonarchery for illegal conduct

The recent conviction of the finfluencer known as ‘Fibonarchery’ is a reminder that finfluencers and the businesses that engage with them risk prosecution, imprisonment and fines if they contravene the law.

Financial influencers (or ‘finfluencers’) have seen an explosion of popularity along with the increasing prevalence of social media platforms such as Facebook, Instagram and Tik Tok. Regardless of whether dark mode is enabled or not, ASIC has made it clear that they will not remain hidden incognito in the shadows for long, as we reported last year in our paper, ‘Warning to ‘finfluencers’: be aware of financial services laws’.

In April 2023, ASIC’s warnings materialised in the Federal Court of Australia issuing permanent injunctions against the finfluencer known as the ‘ASX Wolf’ for carrying on a financial services business without holding an appropriate Australian financial services licence (AFSL), as reported in our paper ‘ASIC on the Socials – Injunctions for Finfluencing ‘ASX Wolf’.

The convictions of ASX Wolf and Fibonarchery serve as another cautionary tale to finfluencers, as well as the businesses that engage them, to think twice before sharing and posting content online to their audiences. Given the rise of online trading apps which can easily be accessed by investors from a few touches of a screen, they are also a timely reminder that ASIC will take enforcement action in order maintain public integrity.

Pump and dump schemes

In May 2023, the finfluencer known online as ‘Fibonarchery’, Gabriel Govinda, was sentenced by the County Court in Melbourne to two and a half years’ imprisonment (to be released immediately on a five-year recognisance) and fined over $42,000 after pleading guilty to 42 charges to do with the manipulation of shares listed on the Australian Securities Exchange (ASX) and the dissemination of information relating to the manipulation.

Particularly, Mr Govinda had used the ‘pump and dump’ approach to increase (or pump) the share prices of smaller companies listed on the ASX by using ‘prop’ or ‘dummy’ bids from 13 different share trading accounts (held under different names) to increase the perceived demand for such shares, upon which the shares would then be sold (or dumped) for a higher price.

The Court held that Mr Govinda had contravened section 1041B of the Corporations Act 2001 (Cth) (Corporations Act), which makes it an offence for a person to do, or omit to do, an act that has (or is likely to have) an effect of creating, or causing the creation of, a false or misleading appearance of active trading in, or with respect to the market or price for, financial products on a financial market in Australia.

By posting about the activity on the online forum HotCopper, the Court found that Mr Govinda had also contravened section 1041D of the Corporations Act, which makes it an offence for a person to circulate or disseminate information about such illegal activity, being the first time ever a person has been sentenced under this provision.

In relation to the conviction, ASIC Deputy Chair Sarah Court said, “Mr Govinda used a social media forum as an integral part of his market manipulation”, and also put on notice that “[f]influencer 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.”1

The conviction follows ASIC’s Report 732 released in July 2022 entitled Pump and dump of micro-cap securities, in which ASIC observed an uptick of social media platforms being used to promote coordinated trading in illiquid securities. ASIC observed that the social media commentary on micro-cap securities, rather than showing a balanced view of the investment, was “overwhelmingly positive” and tended to demonstrate strong support for the securities being discussed.2

Market manipulation by finfluencers have come under scrutiny not only in Australia, but also in other jurisdictions such as the United States. In 2022, the Securities and Exchange Commission (SEC) (the equivalent of ASIC in the United States) announced charges against social media influencer Kim Kardashian for promoting a certain crypto asset to her social media audience without disclosing that she was paid $250,000 to do so.3 Earlier in 2021, the SEC also conducted an investigation into ‘meme stocks’ following the short squeeze of GameStop stock which, after becoming an internet sensation due to posts on social media platforms such as Reddit, increased in price by approximately 2,700% from its intraday low on 8 January 2021 to its intraday high on 28 January 2021.4

The increasing prevalence of social media and online trading platforms means that more investors than ever, particularly younger and first-time investors, are entering the retail investment market, and in doing so, are turning to finfluencers as key sources of information. In this changing landscape, finfluencers need to remember that there is no special consideration for speaking behind a screen – whether it is the obligation to hold an AFSL, or the prohibition against market manipulation, all participants in the financial services industry are subject to the same financial services laws.

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1 ASIC Media Release 23-116MR, ‘Gabriel Govinda sentenced to two and a half years imprisonment and fined for market manipulation and finfluencer conduct’ (3 May 2023).
2 ASIC Report 732, ‘Pump and dump of micro-cap securities’ (14 July 2022).
3 SEC Press Release 2022-183, ‘SEC Charges Kim Kardashian for Unlawfully Touting Crypto Security’ (3 October 2022).
4 SEC Report, ‘Staff Report on Equity and Options Market Structure Conditions in Early 2021’ (14 October 2021), page 19.

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