SEC halts trading in spammed stocks
Share trading in 35 pumped and dumped companies suspended.
The US Securities and Exchange Commission (SEC) announced yesterday that it had suspended trading in the stocks
of 35 companies, all of which had been used in 'pump-and-dump' spam campaigns.
The aim of a pump-and-dump campaign is to push the value of a small, low share-value 'penny stock' company by spamming
large numbers of people with 'inside information' that the shares are about to boom, often using bombastic language
and promising enormous returns. When enough investors have been tricked into buying the touted stocks to raise the
price, the spammers sell their cheaply bought shares for a healthy profit. Unquoted stocks are selected for campaigns
as they are not subject to many of the controls and regulations applied to more prominent companies.
The SEC estimates around 100 million stock-pushing spams are sent each week, and there still seem to be enough willing
investors to make such campaigns profitable. The SEC's retaliation, dubbed 'Operation Spamalot', aims to reduce the
viability of such scams by blocking trading in the companies touted via email bombardment. The companies themselves
are usually unconnected to the spammers.
Spam watchers at Google have
welcomed the move, and
issued a call for users of their Gmail webmail system, which has a strong reputation for spam filtering, to
report any spams which slip through to inboxes via the built-in reporting system. However, market experts at
Forbes magazine are more pessimistic, with an
in-depth article
on the announcement suggesting that, thanks to the hefty profits that can be achieved, such spam campaigns will not
be so easy to stop.
'We started hearing rumours a while ago that this kind of scam was on the wane, with too few gullible investors left
to make it profitable,' said John Hawes, Technical Consultant at Virus
Bulletin. 'Unfortunately, it seems like there are still plenty of people out there who think that random emails from
strangers are a good source of financial advice, just as there are those who trust the same sources for their
pharmaceutical purchases. Blocking trading like this is a step forward in minimising the profitability of such
campaigns, but until email users learn not to read or respond to spammed marketing messages, the spammers will
continue to bombard our inboxes with their junk mail.'
The SEC has promised to continue investigating these scams until the perpetrators are brought to justice. Their
statement, with full details of the companies affected, is
here.
09 March 2007
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