Carson Block has made a career out of sniffing out frauds and betting against them, but now he has sights on a much larger target: the Hong Kong stock market and he's says it's one of the greatest "pump and dump schemes" of all time.

"A number of companies' share prices are likely being manipulated upwards, in many cases by over 500 percent in the past year," the founder of Muddy Waters Research said Monday on CNBC's "Fast Money."

How exactly is the rally a pump and dump?

Block says Hong Kong stocks are being inflated and then passed on to the average investors. Specifically, he points to a spike in prices in many stocks in the final 30 minutes of a trading day. Also troubling to Block is what he describes as suspicious sales between the chairman of companies and the companies' various proxies. According to Block, this internal trading in stocks with small free floats artificially bolsters the value of the companies.

"If these stocks get a large enough market cap, then they get included in the indices. So, index funds come along and have to buy them and that gives the chairman and his proxies a way to exit from their positions," Block said.

Block has correctly called the price collapse of several Chinese companies, including NQ Mobile, which is down 40 percent in the past year, and Superb Summit, which has been under a trading halt since January.

The rally in Chinese stocks has caught many investors by surprise. As of Wednesday, the Shanghai composite was up 52 percent this year, the Shenzhen was up 124 percent and the Hang Seng up 18 percent.