Investors allege a stock wipeout exceeding $950 million, driven by deepfake videos, stolen advisor credentials, and fraudulent SEC filings in a NASDAQ-listed company.
A group of seven shareholders from six countries is suing Ostin Technology Group and nine of its officers and directors, accusing them of running one of the most brazen pump-and-dump operations in recent NASDAQ history — one that allegedly hijacked the identities of real, FINRA-registered investment advisors to do it.
The case, filed February 16 in the Southern District of New York, paints a picture of a scheme that allegedly turned a struggling Chinese display manufacturer into a billion-dollar fraud vehicle, inflating OST's share price by 1,175% over roughly two months before a single-day crash erased more than 94% of the company's market capitalization.
At the center of the allegations are co-CEO Lai Kui Sen and financial advisor Yan Zhao, who the plaintiffs say began laying the groundwork for the scheme in late 2024. By April 2025, the pair allegedly engineered a $5 million registered direct offering and a subsequent Warrant Exchange Agreement that placed roughly 80 million shares — about 75% of OST's outstanding stock — into the hands of at least fifteen co-conspirators at an average cost of approximately six cents per share. Over 70 million of those shares were allegedly handed over for zero cash.
But the share distribution was only part of it. According to the lawsuit, a coordinated promotional blitz launched around May 11, 2025, used fake social media profiles built with names, photos, and credentials lifted from real SEC- and FINRA-registered advisors. Victims were funneled into WhatsApp groups with names designed to mimic legitimate financial communities — including one called "Karen Finerman's Free Exchange Group Sharing," named after the well-known CNBC personality.
The operation allegedly went further, deploying AI-generated deepfake videos of prominent figures including Goldman Sachs Chief Strategist David Kostin, Elon Musk, and Mark Zuckerberg through sponsored Instagram and Facebook ads. Inside the WhatsApp groups, promoters posing as fellow investors allegedly issued daily buying instructions, touted their own supposed purchases, and promised weekly returns of 15-25%. Anyone who pushed back was removed.
Meanwhile, the lawsuit alleges Lai Kui Sen personally vouched for co-conspirators in emails to U.S.-based brokers, calling them legitimate shareholders whose stock was "non-restricted" — and falsely stating they were not affiliated with the company. That cleared the way for brokerage accounts where the co-conspirators could park and sell their shares as the price climbed.
And climb it did. OST's stock ran from $0.78 to $9.40 between mid-April and late June 2025 — all while the company reported declining revenues of $38 million, losses of $10.6 million, and virtually zero institutional ownership. No new products, no major contracts, no earnings surprises. Just promotion.
The selling, according to the lawsuit, was systematic. Four co-conspirators alone allegedly pulled in roughly $43.2 million. Across all fifteen participants, total proceeds reportedly topped $110 million. The money was allegedly laundered through U.S. Treasury ETFs and routed to a Hong Kong-based brokerage firm.
On June 26, 2025, the music stopped. OST's stock plummeted from $9.40 to $0.55 in a single session, with trading volume spiking to more than five times the daily average. Many retail investors had been told to hold until July 4. Stop-loss orders failed to trigger as the stock gapped through price levels too fast for execution.
By September 2025, the Department of Justice had unsealed a criminal indictment charging Lai Kui Sen and Yan Zhao with securities fraud, wire fraud, and conspiracy. The investigation — led by the FBI and the SEC Office of Inspector General, with a referral from FINRA's Market Abuse Group — resulted in NASDAQ halting trading of OST shares indefinitely.
The lawsuit also flags a troubling pattern. Yan Zhao allegedly ran similar schemes through at least two other Chinese micro-cap companies, and the plaintiffs say OST was part of a broader wave of manipulations in 2025 that collectively cost investors more than $1 billion.
The plaintiffs — from Israel, Canada, the United States, Germany, the Netherlands, and Switzerland — say they have been in contact with more than 235 victims, with individual losses ranging from around $10,000 to over $820,000. They are seeking compensatory and treble damages.
No determination on the merits has been made. The case remains at an early stage.
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