Banking

SEC freezes 35 stocks because of SPAM

Yesterday, the SEC suspended trading on 35 stocks that have been targeted for manipulation by spammers in order to make quick profits. According to the AP report, the stocks will be suspended for trading until March 22, and the companies themselves are not necessarily being accused of any wrong doing.

Most of the companies involved are little guys that you've never heard of. What the spammers try to do is to artificially drive up the price of these stocks with "insider stock tip" SPAM messages that tell people to buy these stocks. This typically drives up the price of the stocks during the period that the SPAM goes out and then plummets soon after the SPAM run is over. The spammers make money on the fluctuation by either "shorting" the stock or buying it before the SPAM message goes out and then selling it once the price gets driven up by the people who see the SPAM and go out and buy the stock. Once the spammers start selling at the inflated price, then the stock plummets and the investors who bought the stock because of the SPAM lose money.

"When spam clogs our mailboxes, it’s annoying. When it rips off investors, it’s illegal and destructive," said SEC Chairman Christopher Cox. "Today’s trading suspensions, and actions that will follow, should send a clear message to spammers: the SEC will hold you accountable."

The SEC has named this initiative "Operation Spamalot." TechDirt also has a nice write-up on this story and NPR has a short clip as well.

About

Jason Hiner is Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He writes about how technology is changing the way we live and work in the 21st century. He's co-author of the book, Follow the Geeks.

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