Finfluencer sentenced to 2 and a half years for market manipulation

Gabriel Govinda, known online as “Fibonarchery”, has been sentenced to imprisonment, but will be released immediately on a five-year recognisance in the amount of $5,000 and fined $42,840 after pleading guilty to 23 charges of manipulation of shares listed on the ASX and 19 charges of illegal dissemination of information relating to the manipulation.

In a statement, the Australian Securities and Investments Commission (ASIC) said the court found Mr Govinda’s posts on HotCopper about his market manipulation activity to be a breach of s1041D of the Corporations Act — this is the first time a person has been sentenced under this provision.

According to ASIC deputy chair Sarah Court, a social media forum was an integral part of Mr Govinda’s market manipulation.

“He promoted certain shares that he had an undisclosed interest in, and which he had manipulated, with a view to selling out at a higher price,” Ms Court said.

“Individuals who look to social media, whether that be online forums or via platforms such as Instagram and Facebook, to promote stocks or financial products, should take notice of today’s court decision,” the ASIC deputy chair warned.

“Finfluencer 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," she added.

The corporate regulator said that between September 2014 to July 2015, Mr Govinda used 13 different share trading accounts, held in the names of friends and relatives, to manipulate the share price of 20 different listed stocks.

Mr Govinda manipulated the market, contrary to s1041B of the Corporations Act, by trading between the accounts he controlled (wash trading); using fake, “prop”, or “dummy” bids to falsely increase the perceived demand, and ultimate price, for listed stocks.

He was also found to have illegally disseminated information about his wash trades and dummy bids on HotCopper as he was seeking to increase (or pump) the share price, then selling (or dumping) the listed stocks at a higher price.

“Mr Govinda used a pump and dump approach to manipulate smaller, less expensive companies listed on the ASX which allowed him to influence, and therefore benefit most, from price increases,” ASIC said.

During ASIC’s search of Mr Govinda’s premises in 2015, a notepad was found which detailed his use of HotCopper to promote his market manipulation.

The note, among other things, read: “Buy big parcels of small cap cash backed resource shares at reasonable price, alert H.C Daytraders to the action sell to them at higher price at end of day.”

The Commonwealth Director of Public Prosecutions prosecuted the matter after a referral from ASIC.