The trading suspensions are part of a stepped-up SEC effort -- code named "Operation Spamalot" -- to protect investors from potentially fraudulent spam e-mail hyping small company stocks with phrases like, "Ready to Explode," "Ride the Bull," and "Fast Money." It's estimated that 100 million of these spam messages are sent every week, triggering dramatic spikes in share price and trading volume before the spamming stops and investors lose their 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."
Linda Chatman Thomsen, director of the SEC's Enforcement Division, said, "Many of these companies are no doubt familiar to anyone who reads their e-mail, because each has been the subject of a spam e-mail campaign. While the Commission cautions investors not to make investment decisions based on anonymous e-mails they receive, we are also committed to tracking down those who prey on investors with false or misleading information."
Spammers are spreading these realistic-looking short term "investment advice" e-mails in the hope of pumping a stock enough to offload their own shares at a profit. The increasing quantity and sophistication of so-called "pump-and-dump" campaigns suggests that there is plenty of money to be made. The companies which were talked up, and their legitimate investors, are left to bear the after-effects of the stock dump.
"You wouldn't necessarily believe a tip given to you by a stranger on the bus, so why would you give credence to an e-mail that arrives from nowhere out of the blue?" said Graham Cluley, senior technology consultant at Sophos. "Organized activity by spammers and hackers requires a coordinated defense to protect the wallets of innocent traders ... The fortunes which can be made through "pump and dump" campaigns are enormous, and -- if caught -- those responsible for the stock market manipulation can receive substantial fines and jail sentences," Cluley continued.
