Australian finfluencer sentenced in market manipulation prosecution

Mr Govinda was sentenced to two and a half years’ imprisonment and a pecuniary penalty of AUD42,840, to be released immediately under a five-year recognizance release order, after pleading guilty to: 

• 23 charges of manipulation of shares listed on the Australian Securities Exchange (the ASX); and 
• 19 charges of dissemination of information relating to the manipulation. 

In short, Mr Govinda created and used 13 different share trading accounts held in the names of his friends and relatives to manipulate the price of 20 stocks listed on the ASX. He did that by using the falsely-held accounts to submit “prop” or “dummy” bids for those stocks, as well as to trade shares between those accounts, artificially increasing the perceived demand for (and price of) those stocks. He then promoted the purchase of those stocks (‘pumping’ the stock’s share price further) by sharing information about his market manipulation on the share market forum “HotCopper”, before then ‘dumping’ the stock at a higher price. 

The Prosecution

ASIC investigated Mr Govinda, then referred the matter to the Commonwealth Director of Public Prosecutions for prosecution. Mr Govinda was ultimately charged with, and pleaded guilty to, market manipulation contrary to section 1041B of the Corporations Act 2001 (Cth) (the Corporations Act) in relation to his use of different share trading accounts, and dissemination of information about those illegal transactions contrary to section 1041D of the Corporations Act. 

On 3 May 2023, Mr Govinda was sentenced in the Melbourne County Court, representing the first time that an offender has been sentenced under section 1041D of the Corporations Act. As these provisions give rise to both a criminal offence and a civil penalty provision, it is a sign of ASIC’s determination to crack down on this behaviour that it chose to pursue the criminal justice pathway.  

As noted above, Mr Govinda was sentenced to two and a half years’ imprisonment and a pecuniary penalty. It should be noted that Mr Govinda’s criminal conduct occurred before the 2019 reforms that increased the maximum penalty for each of these offences from 10 to 15 years’ imprisonment, which means that ‘finfluencers’ can in future expect to receive a more serious sentence.

The Implications

ASIC has long signalled its intention to curtail social media-led ‘pump and dump’ campaigns, and has listed that as an enforcement priority for 2023. This prosecution, following closely on the heels of ASIC’s successful civil action against Tyson “ASX Wolf” Scholz for engaging in financial services without a licence to do so, suggests that more enforcement action against ‘finfluencers’ can be expected on the horizon.