If you found out about such a ring and got visibility into what they were doing, and used what you discovered to profit at their expense (without doing any of your own manipulations, i.e. just buying and selling), would you be in trouble?
You’d probably be better off reporting them under Dodd-Frank whistleblower provisions. These apply not just to insiders reporting fraud, but also independent analysis which
use[s] the publicly available materials to show important insights about the possible securities laws violations that are not apparent from the face of the materials
You can’t take it literally in this sense. Among other things, investors cannot commit securities fraud, only executives can. Als, relatedly, Matt Levine’s take regarding insider trading may be relevant here.
This definitely isn't true. Anyone lying to you in connection with a sale of securities in return for financial gain is committing securities fraud. According to any reasonable reading of the statute books, or any of hundreds of insider trading cases that do not involve executives.
They make the alleged fraud public though, do they not? The comment you’re replying to seems to suggest a strategy of intentional non-disclosure. I think that’s a material difference when it comes to analyzing the legality of those two approaches.
You're not going to be able to short random OTC stocks. While it's technically possible, there isn't going to be a market providing shares for these podunk fraudulent issues.
If you found out about such a ring, got visibility into what they were doing, and didn't immediately seek competent legal advice - you would be an idiot.
