Pump-and-dump practice: market manipulation sanctioned by the Paris Tribunal Correctionnel

On 25 May 2023, the 32nd Chamber of the Paris Tribunal Correctionnel found Mr Thierry Boutin guilty of market manipulation and laundering the proceeds of this offence, and convicted him of these offences dating back to 2016 and 2017. This judgement follows a report filed by the AMF on 19 October 2018, exposing conduct uncovered during an investigation into the market of the Dolphin Integration security that could constitute a pump-and-dump type market manipulation offence.

The AMF has repeatedly warned the public about this fraudulent practice in recent years. With the pump-and-dump technique, a person approaches investors, telling them that a share has strong upside potential that must be seized quickly. The resulting purchases drive up the price and trading volume, serving as evidence for the person to encourage further purchases, thereby maintaining upward pressure on the security. In addition to lacking authorisation or approval to recommend these securities for purchase, the person fails to disclose to their counterparts that they often hold significant quantities of these stocks or are acting on behalf of a client or related party who wishes to sell them. They use aggressive sales tactics and promises of high returns, aimed at encouraging retail investors to invest in the asset in order to drive up the share price and enable them to resell the large number of shares they hold at a profit. However, as soon as the sale is completed, the aggressive canvassing stops and the share price slumps, causing significant harm to investors who are left with a substantial position purchased at a high price in often illiquid securities.

Investigations by the AMF's Investigations Division identified four phases of pump-and-dump manipulation by the defendant between April 2017 and January 2018. These actions enabled Mr Boutin to sell his entire stake in the listed company, realising a capital gain valued by the AMF at €2,662,276.

Mr Boutin had already been sanctioned three times by the AMF Enforcement Committee for market abuse, incurring total fines of €2.2 million.

In its decision of 25 May 2023, the Paris Tribunal Correctionnel followed the AMF's analysis and imposed the following penalties on the respondent: a two-year prison sentence and full revocation of the suspension of execution of a previous 18-month prison sentence, together with a fine of €2,662,276, confiscation of the €2,662,000 seized from a securities account in the United Kingdom, and a declaration of ineligibility for five years.

The court also deemed the AMF's civil party status admissible, as the regulator was present at the hearing, marking the first time such an action was taken by the market regulator. It therefore ordered Mr Thierry Boutin to pay the AMF €99,064 to cover the costs incurred during the investigation and €1 in symbolic compensation for moral damages.

This decision is being appealed.

As a rule, the AMF reminds investors and individuals to follow due diligence rules before making any investment:

• No advertising materials should make you overlook the fact that high returns always involve high risk;
• Learn as much as you can about the company or intermediary trying to sell you a product (identity, country of establishment, civil liability, organisational rules, etc.);
• Only invest in products you understand;
• Ask yourself how, and by whom, the purchase price or selling price of the advertised product is set, and find out the precise terms and timeline for selling the product, especially in cases where the product invests in an asset class with low liquidity.