Astrotech is tiny and unprofitable, and it pitches semiconductor and quantum-computing work on the Moon. In May its shares ran up as much as 2,600%, on trading volume 9,000 times the norm. They didn’t stay there. Spencer Jakab’s Exchange column this weekend makes the uncomfortable point that the pump-and-dump has upgraded its tooling, from the boiler-room phone bank to social-media bots to AI — and that it did so, by his account, while U.S. securities regulators were losing staff, dropping investigations and bringing fewer enforcement cases than in any recent year. To be clear, as the column is: there’s no evidence of wrongdoing by Astrotech or anyone else, and the company didn’t respond to a request for comment.
Since investors are largely fending for themselves, the private sector is trying the antivirus model — turning the technology that touts a stock into a screen for it. ScamDunk’s founder, Eli Mizroch, is a former McKinsey consultant who used to run strategy at Israel’s largest bank; the idea came when his brother confessed, a little sheepishly, that a stock manipulation had cost him money. ScamDunk’s algorithm combs Reddit (RDDT), StockTwits and YouTube every day for spikes in chatter about a stock, and it had Astrotech flagged two months before the May run. A Nasdaq (NDAQ) listing lends a microcap a respectability the over-the-counter market can’t, which is part of why the pumps work; the exchange has lately tightened up on tiny foreign companies that were easy to manipulate, but the column notes it has little power to investigate the outside parties doing the hyping.
The broker test
Here’s the detail that should stick. This week, a buy order for a jumpy Nasdaq-listed microcap hit an approval screen at Fidelity; another big discount broker simply let the same trade through. The victims aren’t only do-it-yourselfers, either — the column says even sophisticated professionals who look after other people’s savings can be fooled by bad actors. “Some of them are very, very good at faking their credentials,” Mizroch told the Journal. The theft has evolved too: rather than simply draining a hacked account, thieves use it to buy shares inside the pump. FINRA, the industry’s self-regulator, projects that AI-enabled fraud of various kinds could total $40 billion by next year.
Our read
Consumer protection (M11) has quietly become a self-service department, so behave accordingly. Rule one: treat a stock you first heard about from a feed, a group chat or a stranger’s video as an advertisement, and the correct response to an advertisement is to ask who paid for it. Rule two: friction is a feature. The approval screen that annoys you at one broker is one of the few bouncers left in the building; don’t go shopping for the broker that skips it. Rule three: a hacked account is now a trading tool, so two-factor login and trade alerts aren’t paranoia, they’re the deadbolt.
The house’s one new position this weekend is Valero, a refiner bought for a stated reason with a written trim rule — and nothing in its plan depends on any stock jumping 2,600% in a month. Ask why any stock would need 9,000 times its normal volume to find its price. If something in your own account got there by way of a hot tip, bring the statement; fifteen minutes is enough to tell a position from a promotion.