Just In: SEC Launches Cross-Border Task Force Targeting US Gatekeepers Linked to Chinese ‘Pump-and-Dump’ Schemes
The U.S. Securities and Exchange Commission this week unveiled a sweeping crackdown on U.S.-based professional services firms—particularly small-scale auditors and underwriters—suspected of facilitating Chinese-linked “pump-and-dump” scams. These schemes usually involve inflating stock prices before insiders sell off, leaving unwitting investors with steep losses.
At the center of the initiative is a newly formed Cross-Border Task Force, introduced by SEC Chair Paul S. Atkins on September 5, 2025. It will consolidate enforcement resources across multiple divisions—including Corporation Finance, Trading and Markets, Examinations, Economic and Risk Analysis, and the Office of International Affairs—to tackle fraud involving foreign issuers and their U.S. gatekeepers.
The SEC has made clear its stance: while it continues to welcome legitimate foreign entities to the U.S. capital markets, it will draw a firm line against intermediaries enabling misconduct. “We will not tolerate bad actors — whether companies, intermediaries, gatekeepers or exploitative traders — that attempt to use international borders to frustrate and avoid U.S. investor protections,” Chair Atkins affirmed.
Meanwhile, Nasdaq is reinforcing its defenses with stricter listing requirements. The exchange has introduced a US$25 million minimum public offering proceeds rule for new listings by Chinese-based companies and boosted other threshold criteria to weed out potential fraudsters. These moves follow data revealing that a significant chunk of Nasdaq’s regulatory referrals—nearly 70%—involve Chinese issuers, many tied to micro-cap stocks heavily promoted via social media amid investor losses and a spike in suspicious activity.
Why It Matters
This marks a significant escalation in the SEC’s enforcement strategy. The historic focus on disclosure and climate-related rulemaking under previous leadership has now shifted toward rugged enforcement—particularly in the high-risk domain of cross-border manipulation involving Chinese issuers.
Nasdaq’s updated standards are intended to bolster market integrity and investor confidence in response to reported loss episodes. Notably, in 2025, a scheme involving China Liberal Education Holdings (CLEU) saw a dramatic, fraudulent spike in its share price—driven by deceptive tactics and impersonation of U.S. investment advisors—before the stock collapsed, costing investors heavily.
What Comes Next
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For U.S. gatekeepers: Auditors and underwriters should prepare for heightened scrutiny. Due diligence, transparency, and audit quality, especially involving Chinese entities, are now under an enforcement spotlight.
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Investor safeguards: Market participants are advised to monitor liquidity and listing conditions meticulously. They should consider regulatory guidance and Nasdaq’s evolving threshold rules when evaluating foreign issuers.
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Jurisdictional hurdles: Challenges remain, particularly in cases where evidence and enforcement cross international boundaries. Collaboration across agencies—and potentially with foreign authorities—will be key to holding wrongdoers accountable.
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