Charming Medical Hit with Class Action Lawsuits After SEC Halts Trading

LOS ANGELES, CA – December 29, 2025 – Charming Medical Limited (NASDAQ: MCTA), a Hong Kong-based wellness company, is now the target of multiple class action lawsuits alleging serious securities law violations. The legal actions follow a dramatic trading halt initiated by the U.S. Securities and Exchange Commission (SEC) in November amid concerns of a sophisticated market manipulation scheme orchestrated through social media.

The lawsuits, including one announced by the DJS Law Group, accuse the company and its leadership of making false and misleading statements to the market. This occurred during a period when the company’s stock price skyrocketed by over 600% shortly after its Initial Public Offering (IPO), only to be frozen, leaving many recent investors with significant, unrealized losses. The case casts a harsh spotlight on the growing intersection of social media, retail investing, and potential securities fraud.

The Anatomy of a Meteoric Rise and Fall

Charming Medical Limited began its journey on the Nasdaq Capital Market on October 21, 2025, with an IPO priced at a modest $4.00 per share. The company, which offers Traditional Chinese Medicine (TCM) inspired beauty and postpartum services, saw its stock embark on an extraordinary and volatile climb. In just three weeks, MCTA shares surged to an all-time high of $29.36, a staggering increase that appeared disconnected from any fundamental news or corporate announcements.

This unusual activity caught the attention of regulators. On November 11, 2025, the SEC issued Release No. 104176, ordering a temporary suspension of trading in MCTA securities, effective November 12. The commission cited "potential manipulation... effectuated through recommendations made to investors by unknown persons via social media." The SEC's order detailed a scheme where these individuals allegedly encouraged followers to buy and hold MCTA stock and share screenshots of their transactions, a tactic "designed to artificially inflate the price and trading volume."

Following the SEC's intervention, Nasdaq confirmed the trading halt would remain in place pending a request for additional information from the company. In a statement, Charming Medical acknowledged the SEC order but denied any involvement, asserting it "had not authorized, participated in, or been involved with any social media promotion or recommendation of its securities" and pledged full cooperation with regulators.

The class action complaints filed against the company paint a more detailed picture of the alleged manipulation. Lawsuits contend that Charming Medical was the focus of a "fraudulent stock promotion scheme involving social media based misinformation and impersonated financial professionals." These legal filings allege that "insiders and/or affiliates used offshore or nominee accounts to facilitate the coordinated dumping of shares" during the price inflation campaign, a classic "pump-and-dump" scenario.

The Digital Wild West of Stock Promotion

The allegations against Charming Medical are emblematic of a troubling trend that has regulators on high alert. The proliferation of financial advice and stock tips on platforms like X (formerly Twitter), Discord, and Reddit has created fertile ground for market manipulation. These schemes often target newly listed, small-cap companies with low trading volumes, where a coordinated buying frenzy can have an outsized impact on the share price.

This is not uncharted territory for the SEC. In a notable precedent from December 2022, the commission charged eight social media influencers in a $100 million stock manipulation scheme. In that case, the so-called "FinTwit" personalities allegedly cultivated large followings by portraying themselves as expert traders. They would then promote specific stocks to their followers to drive up the price, only to secretly sell their own holdings at the inflated values, leaving their followers to absorb the subsequent crash.

"The core of the problem is the illusion of expertise and the speed at which misinformation can spread," noted one market analyst who studies social media's impact on trading. "Retail investors, particularly those new to the market, can be easily swayed by charismatic online personalities promising quick profits, without realizing they are the ones providing the exit liquidity for the promoters."

The Charming Medical case highlights the challenge regulators face in policing this decentralized and often anonymous digital landscape. The SEC's action demonstrates a commitment to intervening when manipulation is suspected, but for investors who bought in at the peak, the damage is often already done. The lawsuits now seek to hold the company accountable, arguing its public statements were misleading because they failed to disclose the artificial forces driving its stock price.

A Test of Corporate Accountability

With trading halted and its stock price frozen, Charming Medical now faces a significant legal battle that will test its corporate governance and accountability. The class action lawsuits, filed on behalf of shareholders who purchased MCTA stock between October 21 and November 12, 2025, are based on Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. These sections broadly prohibit deceptive and manipulative practices in connection with the sale of securities.

Law firms like the DJS Law Group argue that Charming Medical had a duty to inform the market that its stock performance was not based on the company's operational health but was instead the result of a suspected promotional campaign. By omitting this crucial context, the company's public statements and SEC filings were, the lawsuits allege, "false and materially misleading."

The deadline for affected investors to file for a lead plaintiff role is February 17, 2026. The outcome of this litigation could have significant financial and reputational consequences for Charming Medical and its executives. If the plaintiffs are successful, the company could be liable for the substantial losses incurred by shareholders who bought into the hype. These legal proceedings serve as a critical mechanism for investor recourse, aiming to recover damages and reinforce the principle that public companies must provide transparent and accurate information to the market.

Eroding Trust in the Wellness Sector

The controversy also raises broader questions about investor trust, particularly within the health and wellness industry. Charming Medical, with its focus on TCM-inspired therapies like "womb-warming" and "pelvic detox," operates in a sector where consumer and investor confidence is paramount. Allegations of financial impropriety can be especially damaging, casting a shadow over the company's core mission of promoting health and well-being.

For investors, the MCTA case serves as a stark reminder of the risks associated with speculative, small-cap stocks, especially those based overseas. The dramatic price surge, devoid of corresponding company news, was a significant red flag that experienced market watchers would have noted. The incident underscores the timeless importance of conducting thorough due diligence and being skeptical of online claims that seem too good to be true. As the legal process unfolds, the future of Charming Medical Limited remains uncertain, caught between regulatory scrutiny and the pursuit of justice by the investors left in the wake of its spectacular, short-lived flight.