In 2024, the financial blogosphere in the Midwest of the United States was dominated by an investment platform called "StellarTrust".
They claimed to have an "institutional-level" investment model that specifically targets small-cap U.S. stocks for "growth potential capture" and was backed by traders from the "core team of Wall Street". They promised to push "3 stocks that are about to rise" to members every day. As long as they buy according to the guidance, hold for 3 days, and stop profit in time, the annualized return can be as high as 72%.
A financial blogger wrote on a social platform: "I made 13% in a month by following the operation, which is higher than the past two years."
In early June 2024, CFIT received a letter of complaint from a financial lawyer in Atlanta. His client was a retired corporate manager who was seriously misled by "StellarTrust" and his account was suddenly frozen after investing nearly $300,000. The lawyer said: "This company does not hold any securities advisory license, but it issues stock investment advice nationwide and charges management fees, which is a clear violation of the Securities Act."
[Legal cover under the appearance]
CFIT investigator Jared Lin first searched the public information of StellarTrust:
Registered in Nevada, the legal person is a consulting company called "Celsius Investments".
The operating website uses SSL encryption and professional appearance design. Users need real-name authentication to access the "Strategy Center".
Provide "VIP Investment Signal Subscription" service, divided into three tiers: monthly payment of $299, quarterly payment of $699, and annual fee of $1999.
Claims that the recommended stocks "come from SEC-approved financial data models."
Everything seems legal on the surface. However, after analyzing its Telegram group information, CFIT's "Illegal Financial Advice Monitoring Module" found that it involved a large amount of undisclosed stock insider information, stock recommendation techniques, misleading earnings display, etc., which already have the characteristics of market manipulation.
[Contact the SEC to establish a fast track]
CFIT immediately contacted the Market Manipulation Section of the SEC's Enforcement Division and launched the "C-Channel" data sharing mechanism under the "2022 Joint Investigation Agreement".
The SEC responded that they had received 37 reports of suspected illegal stock recommendations by "StellarTrust" in the past 60 days, but because the company did not hold a securities account, traditional law enforcement tracking was difficult and direct market manipulation could not be established.
CFIT proposed: It can be cut into its "member income record falsification" and "VIP group trading" behaviors to prove that it is actually an unregistered securities trading advisor and has fraudulent behavior.
[Technical team intervenes to track trading logic]
CFIT technical expert Aisha Kapoor launched the AI behavior recognition system to perform language modeling on user posts in the "VIP Trading Zone" of StellarTrust, and found that its stock recommendation model was suspected to be based on post-facto falsification.
They adopted the approach of "delayed announcement and early modification":
After a small-cap stock rose, a message "We recommended it yesterday" was sent to the group.
Then edited and injected keywords into the multiple lengthy messages posted the day before, such as "Tomorrow is optimistic about $ZVO".
Combined with the Telegram editing records (left by CFIT using an encrypted crawler plug-in), they successfully restored more than 320 tampered stock recommendation information records.
At the same time, an FBI consultant stationed at CFIT contacted Monica Ruiz, a special investigator working at the SEC. She successfully contacted the securities companies where the five victims worked and retrieved the transaction records, confirming that the platform induced customers to buy certain low-liquidity stocks in a concentrated manner through "carrying orders", thereby achieving short-term trading arbitrage.
[Qualification and freezing of assets]
After mastering hundreds of pages of evidence, the SEC filed an application for a temporary restraining order with the Southern District Court of New York on December 15, 2024, requesting an emergency freeze on the bank accounts and digital asset wallets of StellarTrust and its operator Celsius Investments.
The key evidence provided by CFIT includes:
Group information editing and comparison files;
User income record reconciliation report, revealing the falsification of its income data;
"High-frequency loss + manual profit-taking delay" data in at least 89 investor accounts;
Slack records used by internal employees, showing that traders negotiated and recommended timing.
The court approved the asset freeze request within 48 hours, freezing funds equivalent to approximately US$84 million.
[The behind-the-scenes trader appears]
The actual trader arrested is named Derek Linville, who was a registered securities analyst at the New York Stock Exchange and had his license revoked due to an insider trading case in 2019. He used someone else's identity to re-register the company's operating platform, forged a high degree of education and fund experience, and hired 7 part-time "financial lecturers" to recommend stocks live.
When analyzing his group speech, CFIT psychological analysts found that Derek deliberately adopted the "first intimidation and then trust" style of speech - first emphasizing the uncontrollability of the market and "institutional dominance", and then claiming that he could "fight the black box".
This is a typical "savior-type financial manipulation technique".
[Subsequent impact and institutional advancement]
This case caused a stir in the financial circle. The SEC opened a special reporting channel for "illegal stock recommendation platforms", and CFIT simultaneously issued a national warning announcement.
CFIT also took this opportunity to push the SEC to issue a draft guide for transparency of stock recommendation services in 2024, requiring all investment advice platforms to clearly mark the following information:
Whether it is licensed;
Whether the recommendation logic is based on public data;
All historical recommendation records and subsequent verification;
Whether individual stocks have been concentrated on traffic guidance.
At the CFIT internal summary meeting, Deputy Director Lisa Montgomery said: "This is the first time we have characterized a stock recommendation platform as an 'illegal securities trading advisor', which provides a precedent for a series of social stock recommendation fraud cases in the future."
The victory of this battle not only froze a group of accounts, but also redefined the boundary between legality and fraud for the entire industry.