Social media ‘pump and dump’ fraudsters targeted tiny Nasdaq stocks, including this Philly firm’s IPOs, says lawsuit

Nearly 200 small firms, many of them foreign, made initial public stock offerings (IPOs) in 2024 and 2025 on the New York-based Nasdaq Capital Market, looking to cash in on rising investor interest after stock prices began rising sharply.

Priced at just a few dollars a share, a suspicious number of these stocks soared within days of going public, often after they were talked up by aggressive stock promoters on WhatsApp, TikTok, Twitter, and other social media and communications outlets.

Meteoric premiums fell fast, with the stocks crashing to levels below even their original trading prices, matching a pattern Nasdaq and the U.S. Securities & Exchange Commission call “pump-and-dump” schemes that leave later shareholders with losses.

One small, suburban Philadelphia-based investment firm did more than its share of those small, meteoric deals: Bancroft Capital LLC. Bancroft is known for hiring military veterans to sell bonds for blue-chip companies and government agencies.

But from the spring of 2024 through September 2025, Bancroft also went into the small-stock IPO business.

The firm filed with the SEC to serve as lead underwriter for at least 14 IPOs, or about one a month, each initially priced at just a few dollars a share. Eleven of the companies completed IPOs, raising a total of $100 million, and paying the underwriter the industry-standard 7% as a fee. Most of their share prices quickly soared, then collapsed; each remains below their IPO prices.

Nasdaq’s mini-IPO surge stalled late last year, when securities regulators, customers, large investment firms, and Nasdaq itself acknowledged low-priced, small-company stocks were often targets for fraudulent “pump-and-dump” schemes by unknown, unregistered stock promoters.

Here’s how that works, according to the government: Operating far outside the regulated investment sales system, often under fictional names and without asking permission of the newly public companies or underwriters like Bancroft, promoters used social media, podcasts and other nontraditional channels to persuade naive investors to buy cheap shares of these largely unprofitable companies.

With many buyers chasing few shares from these undersized IPOs, the stocks rise briefly to dizzying heights — so the promoters can sell their own shares at fat profits, leaving other buyers with losses as the stocks inevitably crashed.

“These penny-stock IPOs, these $4-a-share offers are generally targeted at unsophisticated retail investors. Almost all of them crash and burn,” often in “pump-and-dump schemes,” said Jay R. Ritter, a professor at the University of Florida’s Warrington College of Business, who collects and analyzes IPO data.

Bloomberg LP in January listed Bancroft among 10 large investment bank sellers of “apparent pump-and-dump deals."

Most IPO stocks, especially those for larger, profitable companies, rise modestly on the first day after trading and most keep rising in their first few years of trading. But those sold by “lower-tier” investment firms typically fall below their IPO price and stay there, according to data Ritter collected on 2,800 IPOs in the past 25 years.

As to IPOs that raise just a few million dollars, with share prices in the low single-digits, “all the securities firms that do them, are bottom-fishing,” Ritter said. “These are not quality companies Morgan Stanley or Goldman Sachs would have been interested in.”

The SEC, the National Association of Securities Dealers, and Nasdaq have recognized a problem with the new wave of small-stock IPOs as targets for “pump-and-dump” fraudsters.

In September, Nasdaq proposed boosting the minimum size of an IPO to $15 million, or $25 million if the company is based in China, which refuses U.S. auditing. That would have made most of Bancroft’s IPOs and similar-sized stock offerings ineligible.

Also that fall the SEC suspended a string of small stocks targeted in apparent “pump and dump” schemes, and the NASDAQ stopped trading in them. In December, the SEC tightened and approved the NASDAQ limits.

The new rules have “all but eliminated” these miniature stock offerings, at least for now, Ritter said. But the shares for most of those recent IPOs remain listed on the Nasdaq Capital market, their prices depressed, often to less than $1 a share.

Some investors in pump-and-dump schemes could recover losses.

Federal authorities in Chicago last year seized $214 million in funds they said pump-and-dump promoters collected at the expense of investors in China Liberal Education Holdings Inc., a money-losing education consultant, whose IPO was underwritten by California-based Boustead Securities and later delisted by Nasdaq. Two Taiwan citizens and five Malaysians were accused of fraud through pump-and-dump schemes. They remain at large and could face long prison terms if caught, tried, and convicted. The U.S. government has set up a fund to give the money back to investors.

Bancroft’s involvement in penny-stock IPOs targeted by pump-and-dump scammers has surprised some area stock traders. That includes former Bancroft employees who spoke on condition they not be identified because they still work in the industry.

Bancroft was founded in 2017 by Cauldon “Cal” Quinn, a former Navy officer and Afghanistan War veteran. He was earlier chief financial officer and managing director for stocks at Drexel Hamilton LLC, which calls itself “the only 100% veteran-owned investment bank.” Bancroft’s financial backers have included Penn Mutual, the life insurance company. Bancroft also sought cash from Freedom Holding, a multinational investment company, according to information obtained by The Inquirer.

Bancroft is itself a certified Service-Disabled Veteran Owned Business, which entitles the company to preference in selling bonds for government-affiliated organizations and companies that set aside some of their business for such firms. Quinn has been lauded for setting up Bancroft and aiding veterans by the U.S. Chamber of Commerce and other national organizations. The firm employs around 37 securities professionals, mostly salespeople, according to industry data.

Bancroft is best known for selling bonds for big, solid, U.S.-based organizations such as the Pennsylvania Turnpike Commission, JPMorgan Chase & Co., and Fannie Mae. Under Quinn, Bancroft has hired and trained veterans, donated to veterans’ charities, and invited senior officers as promotional speakers.

Founder Quinn declined to comment for this story, citing the advice of his lawyer. No regulator has accused him or the firm of wrongdoing in connection to the IPOs.

These Bancroft IPOs have not fared well for investors.

Ten of the stocks briefly zoomed, in four cases jumping from an initial $4 a share to over $100 in their first month of trading.

But within days — sometimes hours — of hitting their highs, all 11 stocks crashed. They have lost a combined total of more than $2 billion from their peak prices.

Nine of the 11 IPOs on the Bancroft list traded at between 54% and 98% below their IPO prices as of May 1. The other two have been dropped from the market by Nasdaq after showing the kind of extreme volatility that regulators say is typical of a pump-and-dump scheme.

A federal securities fraud lawsuit filed in New York on April 17 by a Singapore investor, Lim Yen Nee, targeted Singapore-based Fitness Champs Holdings Ltd., one of the small companies that Bancroft took public. Besides the company’s founders, the suit names Bancroft as a defendant, also identifying seven other Bancroft-run IPOs that, like Fitness Champs, zoomed, then crashed, labeling them “similarly disastrous for investors.” SEC and Nasdaq records show more.

Fitness Champs was among the last of Bancroft’s IPOs. Bancroft took the Singapore-based swimming instruction company public on Sept. 4 at $4 a share. On Sept. 19, the stock zoomed over $100 before settling for the day at $7.20. It now trades at a small fraction of its IPO price, even after adjustment for reverse splits designed to keep the quoted price above $1.

According to the lawsuit, the company, its top executive Joyce Lee Jue Hui and her senior employees, Singapore-based auditor Onestop Assurance PAC, and Bancroft, all share responsibility for Fitness Champ’s share inflation and collapse.

The lawsuit alleges that Fitness Champs executives, Bancroft, and Fitness Champs’ Singapore-based auditor each failed to disclose the risk of “market manipulation and fraudulent promotion” by unknown individuals who promoted Fitness Champs on social media.

Bancroft, the only underwriter in Fitness Champs’ IPO, had also taken public other companies that “suffered volatility-induced declines resulting from market manipulation schemes,” a risk that Fitness Champs investors also faced, but Bancroft failed to warn them about, the suit said.

That made Bancroft’s “positive statements” about the new, little-capitalized, little-known stock “materially misleading,” the suit concluded. And it left investors “susceptible to a market manipulation and a ‘pump-and-dump’ scheme,” the suit alleges.

Fitness Champs went public on Nasdaq on Sept. 3. Soon, testimonials using “false photographs” and aliases promoting the stock began accumulating on WhatsApp, the global messaging giant with three billion users, according to the suit.

One character, “Professor Davis,” invited investors into online stock promotion groups such as his “Diamond Investment Club,” which promoted “40-90% expected gains” for buying shares of Fitness Champ. It described the company as the “undisputed market leader (of the) Singapore swimming education industry.”

On Sept. 19, less than three weeks post-IPO, the stock rose so far, so fast, that Nasdaq halted trading, citing unacceptably high volatility.

The same day Fitness Champs went public, Nasdaq proposed limiting the size of new IPOs.

Fitness Champs raised $15 million, exactly the limit proposed by Nasdaq. The other seven Bancroft IPOs cited in the lawsuit would have been too small to be listed if they had applied after that date.

On Sept. 17, the SEC said in a filing that the agency is investigating “dozens of IPOs” since 2020 whose shares showed extreme, unexplained price volatility in “a suspected IPO manipulation scheme” run from China and Hong Kong.

By Sept. 23, Fitness Champs was down to $1.10.

Six of the 11 companies Bancroft took public in 2024 and 2025 were based in Singapore; four in Hong Kong.

One was much closer to home: TEN Holdings Inc., a 14-year-old digital events firm in Langhorne, headed by Randolph Wilson Jones III, a veteran tech executive. TEN went public in early February 2025, selling more than a million shares in an initial public stock offering (IPO) on the Nasdaq Capital Market, at $6 each, a little higher than the other Bancroft IPOs. The sale grossed $10 million, minus Bancroft’s fees — too small for a listing under today’s rules.

What happened next defied conventional stock-market gravity: Under its NASDAQ trading symbol, XHLD, TEN zoomed to just over $100 a share on Feb. 13, valuing the company at close to $200 million, more than 60 times its annual sales.

But TEN’s outsize gains didn’t last. The next day it slumped to around $31. Four days later, you could buy a share for $18. Over the past month, it hasn’t topped $1.50, meaning large losses for anyone who bought in the heady days of last February.

If this was an unexpected outcome for TEN’s staff of 25, it matches a worrisome larger pattern for small-company stocks, according to Scott Powell, whose firm manages media and shareholder relations for TEN and other companies.

“We have had a number of clients that for no discernible reason, no announcement or new product, have gone up very fast in their first days of trading, then down hard, and stayed down,” even when they reported good news, Powell said.

He blames unknown manipulators, not company managers, who are Powell’s clients, or their stock-market underwriters, such as Bancroft. In his view, “there had to be some manipulation. None of them wanted this to happen. They can’t benefit” because company officials were barred from selling shares for six months after the IPO.

Bancroft has not taken a small company public since Nasdaq changed the rules.