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 Editor in Chief of TechRepublic and Long Form Editor of ZDNet. He writes about the people, products, and ideas changing how we live and work in the 21st century. He's co-author of the book, Follow the Geeks.

5 comments
georgeou
georgeou

"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." Their actions have validated the spammer's methods. They haven't caught a single spammer pushing these pump and dump schemes. When they lock one of these guys up, then they can talk. The people that buy in to these scams and act on these emails are also trying to make a fast buck. They're part of the problem and almost as much to blame.

Absolutely
Absolutely

I have only read the brief synopsis on TR; after reading the other two articles linked, I'll opine further. I did notice the article mention specifically that there was no suspicion of involvement in the fraud by the companies being closed. Hopefully, this helps find the spammers, and hold [i]them[/i] accountable.

Absolutely
Absolutely

A fairer way for the SEC to accomplish the same outcome might be to hold a press conference, asking the public to retain any emails they receive which offer stock purchase advice, to possibly be used as evidence of a crime, if that advice is found to be part of one of these schemes.

stress junkie
stress junkie

The SEC is saying that the pump and dump is bad for the people who are used to pump the stock price. I'm inclined to agree with you that the people who buy into these stocks based on email are either too inexperienced to be trading stocks or they are trying to ride the same wave as the people who sent the spam. Either way I don't have a lot of sympathy for people who buy these stocks and lose money. The good news here is that someone in government is doing something that will have some effect to short circuit the scam on the individual stocks. The bad news is that the owners of these stocks may not be involved in the scam so they are being punished for someone else's crime. I think it would be better, as Tony H. has already said, if the SEC tracked the stock trades and determined who was responsible for sending the emails in the first place and then punish those people.

Tony Hopkinson
Tony Hopkinson

that actually catching the bad guys seems to be out of the question. Personally I'd have been more careful, how I worded this accountability claim. Are they are implying that companies whose stock are being manipulated are involved? The best bet they had for catching the real bad guys was to amass more data on trades in the stocks, so suspending trading on them is stupid. They'll just pick some others and now they know they've been sussed. I've had a few of these, didn't act on them, simply because I always check a gift horse's teeth and I seemed to be at the wrong end of the animal for this particular trick. ;\

Editor's Picks