SEC Halts Trading on Spam Driven Stocks

goombah99 writes "The SEC has taken action to halt transactions on spam-touted stocks. Presumably this opens an opportunity for denial of service attacks on stocks. However, to be effective spam generally must target penny stocks with historically low volumes and thus the actual capitalized market impact or effect on the companies for a temporary shutdown can be expected to be negligible and transient. One example was given of a touted apparel stock jumping from 6 cents to 45 cents over a period of days before settling down to ten cents a share and near 65,000 or about $6500 in transactions (an eighth of the peak share volume, and a 50th of the peak transaction value). In other words, the market distortion of a brief shutdown, even if it were a DOS attack, would be massively less than the integrated spam surge. The thing I found surprising was that for this to be an effective measure with human oversight then the number of such events must be relatively small in number. From the amount of spam I get I'd have guessed it was a tidal wave."

Readability?

[Whiney Mac Fanboy]

One example was given of a touted apparel stock jumping from 6 cents to 45 cents over a period of days before settling down to ten cents a share and near 65,000 or about $6500 in transactions (an eighth of the peak share volume, and a 50th of the peak transaction value).

Can someone please lend cowboyneal some punctuation marks?

Check out how this summary scored [ilovejackdaniels.com] on the Flesch-Kincaid Reading Level [ilovejackdaniels.com]:

The text you entered has been checked, and scored as follows:

Flesch-Kincaid Reading Ease: 38

Ideally, web page tex

Re:

[Anonymous Coward]

Your IQ index: 80

Ideally, you should have an IQ in the triple digits to understand ./. The higher the score, the easier it'll be for you.

Re:

[mandelbr0t]

Pedantry is only funny when it's painfully correct. Slash ('/') dot ('.') is correctly abbreviated as '/.'. Luckily there's lots of smart dyslexics, so I won't speculate on your intelligence, just nitpick your nitpick. :)

Re:

[Anonymous Coward]

Let it never be said that you are a little bit anal about spelling and grammar...

Re:

[pipingguy]

Definition of "anal" (not relating to "bumriding" or "butt sex"): "Excessive" attention paid to one specific topic; pedantry. Usually used as an insult towards those who explore deeper into a subject than the whiner can comprehend. Origin: likely from early years of toilet-training where removal of feces is taught.

Re:

[afaik_ianal]

But if you paste their own introductory text into their tool, they score 49, 11, and 18. All of these scores are worse than "ideal".

I had no problems with the sentence you had troubles with. I also fail to see why making it hard for all the 12 year olds (and adults with similar language skills) is such a bad thing for Slashdot.

Re:

[Siker]

I second that opinion. This test is just another lowest common denominator search tool. It makes it easier to write text for children, which is good if you're writing for children, but perhaps not so good if you're writing for adults. Remember, to reach the sky you must aim for the stars. If you instead aim for the smallest child you can see, I think you're not doing so well.

And not only because you're aiming at innocent children. :)

Re:

[svunt]

I agree that the summary above is utterly horrendous, but I just took a very simple, very readable email and ran it through the same tests, and got almost identical scores. Syllabic intensity and sentence length aren't everything.

Re:

[SEWilco]

I get "simple, very readable email" all the time. "This stock will really move soon!"

MOD PARENT UP. Story impossible to understand.

[Futurepower(R)]

MOD PARENT UP! This is a new development among Slashdot editors: Stories that are impossible to understand.

Comments about poor editing are always on-topic.

Re:

[1u3hr]

This is a new development among Slashdot editors: Stories that are impossible to understand.

You must be new here...

Re:

[hotdiggitydawg]

Can someone please lend cowboyneal some punctuation marks?

Check out how this summary scored [ilovejackdaniels.com] on the Flesch-Kincaid Reading Level [ilovejackdaniels.com]:

The text you entered has been checked, and scored as follows:

Funny you should mention that. Your post scores even worse:

The text you entered has been checked, and scored as follows:

Flesch-Kincaid Reading Ease: -3
Ideally, web page text should be around the 60 to 80 mark on this scale. The higher the score, the more readable the text.

Flesch-Kincaid Grade Level: 15
Ideally, web page text should be around the 6 to 7 mark on this scale. The lower the score, the more readable the text.

Gunning-Fog Index: 22
Ideally, web page text should be between 11 and 15 on this scale. The lower the score, the more readable the text. (Anything over 22 should be considered the equivalent of post-graduate level text).

Notes:
Average syllables per word: 2.4
Average words per sentence: 6.33

What spam?

[Seumas]

I don't understand what "spam" the SEC is discussing, here. Didn't we eliminate spam a few years ago when congress passed the CAN-SPAM Act?

And if we're going to halt transactions during periods of heavy spam for a particular stock, why not halt transactions during periods in which pundits in print, radio and television are promoting or demoting particular stocks? Or, even better, how about we just not worry about it in the first place because anyone that is stupid enough to base their investment decisions on email campaigns should suffer their own stupidity.

Re:

[zappepcs]

As annoying as spam is, I agree with you. It doesn't matter how the stock info is spread about the community, there should be no reaction to it, especially because it is deemed bad because someone is sending emails about it.

If traders wanted to setup technological means, they could entice investors to play a part in what would amount to a botnet interacting with the stock exchange, except that it would be perfectly legal. Just one text message and 500Million in trades is made in the next 20 minutes. Spam is

Re:

[Volante3192]

This, of course, goes against much of the suggestions from /. before on this topic, in that the SEC should get involved in this penny stock spam trading and put a halt to it because spam stock could be traced back to whoever makes the biggest deal on it in the end.

Can we make up our minds here? I'm getting confused what I should be a zealot about...

Re:What spam?

[shird]

Because those 'stupid' enough to go out and buy those stocks give the spammers incentive to continue. Spamming people like you and I who don't buy the crap.

Re:

[MarkRose]

Because those 'stupid' enough to go out and buy those stocks give the spammers incentive to continue. Spamming people like you and I who don't buy the crap.

Who is to say that others aren't taking advantage of the spammer's work? If you can buy early and sell a day later, I imagine there'd be a lot of profit to be had.

Re:

[Volante3192]

If you can buy early and sell a day later, I imagine there'd be a lot of profit to be had.

That involves knowing which stocks are going to be spammed on the next day. Good in theory, but while IANASB (stock broker) I don't think portfolios of penny stocks are very common, so it'd require a lot of guesswork unless you're in the loop

Re:

[MarkRose]

I doubt it would be too difficult to get a few thousand email addresses, get them spammed, then scan incoming emails for new stocks. You don't have to get in before the spam hits, just before the wave crests, that's all.

Re:What spam?

[1u3hr]

You don't have to get in before the spam hits, just before the wave crests, that's all.

There was a story on the economics of these scams a few months ago. One conclusion: no, you can't profit riding on the coat-tails. One reason is that penny stocks are very thinly traded, you can't instantly buy shares. By the time your order is processed, it's too late. You're buying from the pumpers as they cash out (of course, they bought in days before). And they only average about 5% gain.

http://it.slashdot.org/article.pl?sid=07/01/21/202 9210 [slashdot.org]

Re:

[maxume]

They are generally stocks that are very difficult to short, as no one will 'loan you the shares'.

Re:

[1u3hr]

Too late? Then bear rather than bull. It may be politically correct to say that these horrible nasty illegal spams cannot be exploited, but that doesn't make it true.

Not politically incorrect. Impossible.

http://www.investopedia.com/university/shortsell ing/shortselling1.asp
"There are many restrictions on the size, price and types of stocks you are able to short sell. For example, you can't short sell penny stocks and most short sales need to be done in round lots."

Re:

[jonbryce]

You need to already own the shares to do that. And the sort of companies they pick on are small caps where it is unlikely that you already own then.

Re:

[Joebert]

You don't have to get in before the spam hits, just before the wave crests, that's all.

Actually, you do have to get in before the spam hits if you want to be sure to get rid of all your shares & cover fees.
If anyone profits from theese things without knowing they will happen beforehand, it's an amazing stroke of luck.

Re:

[mgblst]

Just spend all your money on penny stocks, as many different ones as you can. Wait for the invariable spam to do the rounds, and sell at a high. You can easily treble your money.

Re:What spam?

[McFadden]

Who is to say that others aren't taking advantage of the spammer's work? If you can buy early and sell a day later, I imagine there'd be a lot of profit to be had.

Unfortunately I'm a little thin on the details, but I distinctly remember reading that at least one of the big investment banks has a team that does exactly that. i.e. monitoring the 'net to try and pick up as quickly as possible on pump'n'dump stocks in order to maximize any remaining value from from the spammers activities.

Re:

[dr_dank]

Unfortunately I'm a little thin on the details, but I distinctly remember reading that at least one of the big investment banks has a team that does exactly that. i.e. monitoring the 'net to try and pick up as quickly as possible on pump'n'dump stocks in order to maximize any remaining value from from the spammers activities.

Given how many of the pump n dump boiler room schemes are Mob-backed, I'm surprised that this bank hasn't been visited by goons protecting their turf. Getting between the mafia and the

Re:

[Some_Llama]

"sensible as punching a baby bear in front of its mother."

But what if the baby bear has it coming? It takes a forest to raise a bear, or so they say...

Re:

[McFadden]

Given how many of the pump n dump boiler room schemes are Mob-backed, I'm surprised that this bank hasn't been visited by goons

I think many would consider the investment banking industry and organized crime to be one and the same.

Re:

[larry bagina]

Who is to say that others aren't taking advantage of the spammer's work? If you can buy early and sell a day later, I imagine there'd be a lot of profit to be had.

Congratulations. You're the kind of idiot that loses money chasing these penny stocks and makes the spam profitable. Next time, be sure to suggest short selling to get double retard points.

Re:

[jonbryce]

That's what a lot of the victims think. In reality, it doesn't work like that.

Re:

[garcia]

Because those 'stupid' enough to go out and buy those stocks give the spammers incentive to continue. Spamming people like you and I who don't buy the crap.

Some people might be playing the penny market and could be oblivious to the fact that one particular stock is being pumped and dumped by the spammers. I know someone that invested several million shares in one of these companies only to find it frozen for the next 10 days while the SEC investigates.

Just because we wouldn't buy the stock after seeing the

Re:What spam?

[1u3hr]

That said, plenty of people (possibly like Slashdotters) see the spams and buy those stocks knowing that it's going to be used as a pump and dump.

The best scams are those that make the sucker think he's pulling a fast one. It doesn't work. The "smart" people trying to cash in on this lose.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id =920553 [ssrn.com]

"Before brokerage fees, the average investor who buys a stock on the day it is most heavily touted and sells it 2 days after the touting ends will lose approximately 5.5%. For the top half of most thoroughly touted stocks, a spammer who buys at the ask price on the day before unleashing touts and sells at the bid price on the day his or her touting is the heaviest will, on average, earn 5.79%."

You think you can squeeze a profit while the spammer is cashing out and the price is falling, good luck. They know the game, you don't.

Re:

[mrchaotica]

You think you can squeeze a profit while the spammer is cashing out and the price is falling, good luck. They know the game, you don't.

Sure you could, by shorting the stock while the spammer is trying to cash out. Unfortunately (as I learned the last time this was discussed on Slashdot) you're not actually allowed to short-sell penny stocks (or something like that).

Re:What spam?

[um... Lucas]

You are allowed to short any stock you'd like. Problem is, those shares need to be borrowed from somewhere (typically, a hedge fund, mutual fund or pension fund). Since none of those sources are likely to have any holdings in your penny stock, there simply aren't any shares available to be borrowed. And if there were, rest assured, the spammers would have already acquired those lonng before sending out the first email.

Re:

[1u3hr]

Sure you could, by shorting the stock...Unfortunately (as I learned the last time this was discussed on Slashdot) you're not actually allowed to short-sell penny stocks

So what's your point?

Re:

[UbuntuDupe]

I don't understand what "spam" the SEC is discussing, here. Didn't we eliminate spam a few years ago when congress passed the CAN-SPAM Act?

The CAN-SPAM Act didn't eliminate spam. Most people still get spam.

*please mod informative, please mod informative*

Re:

[bhima]

Shame I can't mod you as "missed sarcasm"

Re:

[livewire98801]

"-0.5, Sarchasm"

I'd use the hell out of it when I had points, along with a "-1, idiot"

Re:

[Mateo_LeFou]

Um... you guys are both going to need a "-.5, Missed Very Dry Humor" to go with that. UbuntuDupe's post was clearly intended to be funny.

Re:

[bhima]

Oh... I'm sure it was meant to be funny but it failed.

in any event I hadn't heard 'sarchasm' before so it's all worth it.

Re:

[hugorxufl]

Crap, so, what am I supposed to do with all of my shares in HRL (Hormel)?

Re:

[DrHyde]

Don't be silly, spam stopped thanks to the efforts of those wonderful people at Microsoft [cbsnews.com]. You don't honestly think *government* can do anything do you? No, it's all down to the free market!

Re:

[Seumas]

I'm not really sure that "invest intelligently" and "sell a few hours/days later" belong together unless you manage a hedgefund. For that matter, what serious investor plays in penny stocks?!

Pro-spam server

[gmuslera]

Would be nice to see at last a mail server that discards all legitimate mail and keeps just the spam, because could be the fastest way to be a step ahead of the people that receive that.

Re:Pro-spam server

[symbolset]

They have this. It's called hotmail.

Funny thing about Karma

[symbolset]

It's a shame funny points don't count towards karma on slashdot. I wish someone had modded this insightful.

Re:

[flyingfsck]

How about spamradio: http://www.spamradio.com/ [spamradio.com] A whole pro-spam broadcasting system.

It's about time...

[bitkid]

So it finally payed off that I forwarded all my spam to the SEC :-)

The current amount of stocks advertised by spam is human-manageable (see http://www.spamnation.info/stocks/ [spamnation.info] for a list of about 15 spamvertised symbols), and it will probably stay that way, because there are not that many companies that have the volume and the price such that spam will have an influence on the price; I think that is a very sensible solution for the spam-problem in that domain; I wish they could do something like that for medication-spam as well...

Re:It's about time...

[value_added]

The current amount of stocks advertised by spam is human-manageable

Maybe yes, but according to the fine article:

SEC Chairman Christopher Cox said that not even the investor protection agency is immune to the onslaught of stock-related spam. He said the SEC's public affairs director, John Nester, received an e-mail touting the stock of one of the 35 companies.

``Not even the SEC's spam filter can stop all this spam,'' Cox said.

Rather funny, if you think about it; at one level, this could be a case of the Spamming the Wrong Guy. What isn't so funny is reading the trading volume numbers and being reminded that there's people out there who do read their spam.

Re:

[Stephen Samuel]

What isn't so funny is reading the trading volume numbers and being reminded that there's people out there who do read their spam.

when you're spamming 55 million people, you're bound to find a few dozen suckers willing to part with their money in hopes of a quick buck.

Or, as I like to say: "A one in a million shot isn no big deal when you've got 25million bullets".

It is really unfortunate

[symbolset]

that we cannot attach a toxic milkshake to a spam and bulk mail it to the entire Internet.

If we could, the Spam buying morons would drink it and log off.

<idea>...

some things to remember re: microcap/pink sheets:

[artifex2004]

1) these are companies that can't get listed on regular exchanges. Either they're too new or small to afford the fees, or they don't have the financials that the exchanges require.
2) this is a big one: the market makers may not report every single transaction and every price change, or every minute or hour. You're used to seeing the market change, and having updated info pretty quickly after a trade. "Real time level 2 quotes" and all that. Guess what? These are thinly traded. Some report daily. Some report every couple of days. Some report weekly. Unless you check, you don't know. If you see stock trading for 5 cents one week and 25 cents the next week, you don't know if it really is going up, or if it went to 10 dollars in the middle of the week, and all the pumpers jumped, and 25 cents is the reported figure on the way back down. You just don't know.

Go here [sec.gov] for some more information. Really. Don't think about these without being sure you know the risks.

(Also, I have to say, while the information I gave in #2 was deemed correct when I worked for a broker, I was never a licensed broker myself. So don't take my word for it still being completely true. I see that a company called pinksheets.com offers what they say are real time quotes now for dealers, but they're neither a NASD broker-dealer nor SEC-registered, so... who knows what that means? Ask your broker and do your own research. Be sure and ask your broker what it means when you try to sell "at market" on a pink sheet, too, if you're assuming you're going to be able to get out quickly :) )

In a race between weapons and armor ...

[Ungrounded Lightning]

Presumably this opens an opportunity for denial of service attacks on stocks. However, ... the market distortion of a brief shutdown, even if it were a DOS attack, would be massively less than the integrated spam surge.

Two platitudes:
  - In a race between weapons and armor the weapons eventually win.
  - To end a war you must defeat the enemy.

My bet: Once this goes into effect the spammers will adapt. Expect the result to be a bigger problem.

Re:In a race between weapons and armor ...

[TubeSteak]

My bet: Once this goes into effect the spammers will adapt. Expect the result to be a bigger problem.

Assuming the SEC creates an effective system, what are the possible results?

1. Pump N Dump Spam goes away
2. Spam volume increases, but the SEC's system halts trading of those companies
3. Spam volumes are tailored to raise prices in a more natural fashion and the SEC doesn't catch the new behavior

Of those results, #3 is the only one in which the Dumpers will make money and even then, it won't be nearly as profitable.

Platitudes are nice, but honestly, you're going to have to do better than that to backup your conclusion. Especially since your second platitude isn't 100% supported by history. Two examples off the top of my head are The Korean War [wikipedia.org] & The Six Days War [wikipedia.org]

Re:

[Pollardito]

you forgot option 4: the SEC doesn't do as good of a job of catching these as they'd like to and it keeps going on just with a slightly lower hit rate

Re:

[cdrguru]

We're still fighting the Korean war. It isn't over by a long shot. Check how many US troops are sitting on the border waiting for the invasion that hasn't happened yet.

Israel is still at war also. Every country that was in the Six Day War still has a no-trade policy with Israel and pretty much is supporting people killing Israeli civilians and soldiers.

Sounds like to unresolved, continuing wars to me.

Re:

[BillX]

Or the spammers offer "protection" as their moneymaker over the meager 5.79% of spam touts.

Hey, YKNZ corp... we at SpamHell Inc. were just about to pump 'n dump your penny stock, but this would cause an immediate SEC trading halt! So, we'll offer to cease and desist for the low, low price of....

instead of banning everything

[Kanasta]

when not just educate the users and let the ones that don't listen die cruel horrible deaths and be a lesson to others?

Re:

[Tweekster]

Because people are stupid, they will fall for this stuff, cause problems for others then demand from their leaders that something be done.

Re:

[mgblst]

Not just stupid, there is nothing wrong with being stupid. But greedy and stupid will get you into trouble.

Stupid is sitting watching Big Brother on tv all day. Stupid and greedy is applying for every get rich quick book, going to every talk, etc.

Re:instead of banning everything

[larry bagina]

Consider this: Slashdot is supposedly full of intelligent people. I expect around 0% would buy viagra or penis enlargement pills from a spam that can't even spell them correctly. Yet in every story about stock spam (including this one), around 50% of the comments are people who think you could make money by a) shorting the spammed stock(1) or b) buying the stock and then selling it after it goes up 5% (2).

1. For penny stocks/pink sheets, shorting is pretty much impossible
2. The same rationale of every other buyer. You're not as smart as you think you are.

Re:

[Paulrothrock]

That would be a great idea if everyone were completely independent. When someone declares bankruptcy, it affects me.

Too late.

[sakusha]

By the time the SEC decides to act, the pump and dump is already over. These scams happen in the space of a few days. Blocking trading on a group of stocks that have already been pumped and dumped is futile. As the submission suggests, if they could act promptly by blockign trading immediately after a spams, that would effectively be a DoS attack on a stock trading, any spammer could initiate one. The SEC needs to go after the spammers, not the stocks.

Re:

[king-manic]

They might use a heuristic. If X stock rises > 100% over 30min stop trade for 5h. that might actually eliminate most profitable pump and dumps.

Re:

[larry bagina]

They're called penny stocks for a reason. If a stock is trading at $0.05 a share, a 100% gain isn't meaningful (buying a couple hundred shares could do that)

Re:

[carlos92]

A couple hundred shares would be 10 dollars...did you mean a couple hundred bucks?

Re:

[Paradise Pete]

The SEC needs to go after the spammers, not the stocks.

It's not very likely that the companies are completely innocent. All sorts of crap goes on. Often the entire company exists only to try to fleece unsophisticated investors.

Re:

[kerrbear]

Blocking trading on a group of stocks that have already been pumped and dumped is futile

I don't understand this. Given that nobody will buy the stock until they recieve the email, the SEC could easily monitor the spam and shut down trading after they see it. I'm guessing they could be faster at stopping the trade than grandpa is in buying it. Or am I missing something?

Re:

[gbjbaanb]

Admittedly, the SEC might act too slowly, but we're assuming the spammers need a few days to pump the market up, and that they will not sell until the stock has risen a certain amount. So, the SEC only has to stop trading of the stocks *before* the spammers have sold, then the spammers will have placed a load of money into stock they cannot sell. When trading resumes, these stocks will have their price set at the level it was before the pumping began.

Hopefully, when the spammers then try to sell the ton of

The .com bubble is over

[HomelessInLaJolla]

Of course the SEC is acting now. The Federal Senators and Representatives have already made their millions from their priveleged position in the know. Now it's time to ensure that the common people remain in debt.

Ready to explode

[psaunders]

From TFA:

The SEC said it launched an enforcement effort to protect investors from potentially fraudulent spam e-mail promoting small company stocks with phrases like, "Ready to Explode," "Ride the Bull" and "Fast Money."

Now, Fast Money I get. But if I saw the phrase "Ready to Explode" in spam, to me that would suggest something pretty far from small company stocks.

And "Ride the Bull" is something else entirely...

Fax Spam

[bizitch]

I am hoping that they are including Fax spam when they mean "Spam"

This seems to be the biggest driver for fax spammers - the old pump-n-dump

Its popular with them because they don't have to ID themselves with a real callback number(s) - they don't want any calls they just want you to bid up that stock.

I am also hoping that they use this as a means for trapping and busting spammers (both email and fax)

Shouldn't the SEC (or whatever) be able to look at all the perfectly timed trades on the victim stock and tra

Wrong answer to problem

[winkydink]

All this does is give bad guys a new way to extort money from companies. "Hey, Mr. CEO! Wire $50k to my egold account by Friday or I'll send pump&dump spam and get trading suspended on yoru company's stock."

The right answer is to unroll these trades and see who is profiting. Then start doing some analysis on the brokerages associated with these trades, because I'm willing to bet we're talking about "less reputable" brokerages. Now pull their securities dealer's license. Do you think that would cause other brokerages to look more carefully at sudden large volume trades on previously thinly-traded stocks? I do.

Re:

[Dachannien]

The stocks involved typically have such low volume that they may not even trade at all some days. Once the IPO is complete, the CEO probably doesn't give a rat's ass if his or her stock gets halted for a few days.

Re:

[winkydink]

A company's market capitalization affects it's ability to borrow money / obtain credit. What's the market cap of a company on which trading has been suspended?

Re:

[1u3hr]

Hey, Mr. CEO! Wire $50k to my egold account by Friday or I'll send pump&dump spam and get trading suspended on yoru company's stock.

Why should the CEO care, unless he's about to cash out himself?

Does the U.S. enforce securities laws anymore?

[nbauman]

Pump and dump violates the securities laws, right? The SEC's own web site calls them "fraudulent".

So why can't they track these guys down and prosecute them? The SEC has a pretty good investigative force. They tracked down Martha Stewart. They subpoenaed her phone records and everything.

You have to buy these stocks from a broker, so that leaves a paper trail. They have to report stock purchases to the IRS, if nothing else. You can't buy stocks with stacks of currency, can you?

The guys who are behind the pump and dump schemes by definition will buy the stock at the beginning, send out 10 million spam to get the suckers buying, dump the stock when the price goes up, and leave the suckers holding the bag.

So why can't the SEC track these guys down through the brokers, and prosecute them for this pattern of buy and sell that is obviously fraudulent?

Will somebody who understands this better than me explain to me why the SEC can't enforce the law?

Why they have trouble tracking

[The Mutant]

First of all, the fraudsters aren't stupid enough to leave (much) of a paper trail; its common for them to use brokerage accounts compromised by phising. They execute their pump'n'dump via a stolen account, and by the time the dust settles the funds have been transferred.

Secondly, many of these folks operate from abroad and the amounts involved - in any single fraud - just aren't large enough to warrant the intervention of The Feds. Sad but true.

Because the market for these shares is so thin - most of the pink sheets companies will have market caps of less than one million dollars - the criminals can't fraudulently run huge amounts of money. So they perform a large number of smaller transactions.

Short of some organised crime indictment, The Feds won't get involved as the individual amounts are so damn small.

Re:

[hotdiggitydawg]

First of all, the fraudsters aren't stupid enough to leave (much) of a paper trail; its common for them to use brokerage accounts compromised by phising. They execute their pump'n'dump via a stolen account, and by the time the dust settles the funds have been transferred.

...so, follow the trail then. They don't get transferred to thin air.

Secondly, many of these folks operate from abroad and the amounts involved - in any single fraud - just aren't large enough to warrant the intervention of The Feds. Sad but true.... The Feds won't get involved as the individual amounts are so damn small.

Agreed that it's sad but true. But it's obviously serious enough to warrant attention and action by the SEC. There has to be enough evidence there already that this crime is organised. I'm sure they could get international authorities to help, even the IRS too perhaps? They took down Al Capone, surely they could throw their weight about here, maybe lean on a few brokers and banks...

Re:

[cdrguru]

Bank privacy laws. The minute you leave the US, most banks will never disclose who owns a given account. Tracking transactions is impossible through just one layer of banks in the Cayman Islands or Switzerland.

Sure, the SEC and FBI can get Germany or UK to cough up some information. That doesn't work elsewhere. Russia? Probably not. Russia through A Cayman Islands bank? Forget it.

Re:

[pjrc]

Because the market for these shares is so thin - most of the pink sheets companies will have market caps of less than one million dollars - the criminals can't fraudulently run huge amounts of money. So they perform a large number of smaller transactions.

Short of some organised crime indictment, The Feds won't get involved as the individual amounts are so damn small.

From TFA:

``Now that we have stopped the trading in these stocks, we will focus our attention on the people behind the spam and profiting f

Paper trail

[HomelessInLaJolla]

the fraudsters aren't stupid enough to leave (much) of a paper trail

One might even go so far as to say that the laws are specifically written to leave loopholes in which to hide the paper. The closer you are to the social circles which write the rules the better chance you have of knowing where and how to hide the paper.

Short of some organised crime indictment, The Feds won't get involved

Due to their continued involvement the Feds should be the recipients of organized crime indictments.

Re:

[larry bagina]

Martha Stewart wasn't convicted of fraud, insider trading, or anything blatantly illegal. She was convicted of lying to a federal investigator (during the investigating of a "crime" for which she was never charged). Just like Libbey, who was convicted of lying (or perhaps misremembering) during the investigation of another non-crime.

Think that over for a minute. It smells an awful lot like entrapment, doesn't it?

ISPs that host zombies need to hurt.

[jthill]

It's time to stop tolerating ISPs that tolerate infected PCs. Is spam the only thing a zombie can do? No. Will this stop ddos botnets? Not a chance. One thing at a time, and spam leaves a trail. The Heinlein strategy: ~when you don't know how to solve a problem, do any part of it you do understand, then look at it again.~

Get as many as possible of the major email services - gmail, hotmail, yahoo, aol, all their equivalents in other countries - to backtrack inbound spam envelopes to a retail ISP. Crank up the heat on the worst offenders until they shut off zombies. Private warnings, name and shame, SMTP brownouts and blackouts, BGP blackhole.

The ISPs all have AUPs. Seems simple enough: they warn spam sources, point them at instructions and commercial offers of help for a full disinfect, then if they stay infected shut them off until they pay for an ISP-provided (and expensive) brainwipe. That'll make lots of new niches in which the scum who'd otherwise be sending spam can turn a buck, and take the load off everybody but the clueless.

Now, obviously, this is *too* simple somehow, or otherwise somebody'd be doing this already. What is it?

Re:

[livewire98801]

I totally agree. I worked at Speakeasy for a while, and they had such a policy. It wasn't that difficult to implament.

1) User 1234 has had 500 smtp connections open in the last hour, trip a flag.
2) If there are x number of flags tripped in y period of time, freeze account until customer calls in.
3) Restore account, include a grace period of z hours. If problem not resolved, freeze account again.
4) Inform use that the service will not be reactivated until they have cleaned the computer. If they claim it

Re:

[The Master Control P]

ISPs won't do this because of the people who are their customers now. It's the fucking idiot masses. Here's an example:

Hi, I'm the dipshit with an infected machine that's spewing viruses, spam, and ddos over it's connection. I don't care that my ignorance is damaging to the Internet. I am entitled to be on it. Who cares that it's the most complex thing humanity has ever created, I have a right to use the Internet despite knowing nothing about how to be safe on it. And don't you dare suggest I educate mys

Re:

[LordLucless]

Doing so pisses off customers. No one single ISP wants to be the first to do this, for fear of customers jumping ship to a more tolerant competitor. Unless some pressure is put on the industry from above (fines for spammy ISPs, etc) then this is never going to be implemented on a wide scale. Some small, forward-thinking ISPs will take steps, but the big ISPs catering to your average Joes will not.

Personally, I like my ISPs solution. Port 25 is blocked by default, but you can logon to your control panel an

Expand the SEC jurisdiction

[Statecraftsman]

Too bad the SEC can't freeze the artificial erection and weight-loss markets.

SEC Public Affairs officer lost money too?

[flyingfsck]

From TFA: "SEC Chairman Christopher Cox said that not even the investor protection agency is immune to the onslaught of stock-related spam. He said the SEC's public affairs director, John Nester, received an e-mail touting the stock of one of the 35 companies." That would explain the crackdown...

We need a greater context here

[JRHelgeson]

The stock spam and pump-n-dump activities; while they do pose a threat to our financial systems, these actually represent the last step(s) in the chain for some very serious and very brilliant criminal activities. There is a much, much bigger story going on here that the public are not being told about.

Permit me to break it down for you:
The Phishers will phish usernames and passwords for brokerage accounts, or they will collect the information from personal users by means of a trojan. The criminals log into these accounts and schedule sell orders for whatever stocks they are holding, and schedule buy orders for the penny stock they are going to pump-n-dump. Then they walk away.

They execute the spam, eager traders read the spam, look at the account and see that volume of shares purchased have been bought up in the past n-hours and they jump in. The pumpers have bought their stock before hand and once the volume peaks, they dump. The account holders whose accounts were compromised are left holding the pumped-dumped stock...

The criminals are getting GOOD! They don't need to worry about transferring money out of the compromised brokerage accounts, they are stealing the money and laundering it all in the same step.

And it should be no big surprise that the criminal organizations behind the whole operations is the Russians.

Welcome to professional bank robbery in the 21st century.

*NOW* this is not to say that the traditional "boiler rooms" don't exist. They most certainly do and they continue to pose a serious problem which the SEC has addressed for many years. What is new is this most recent innovation that targets retirement accounts, day traders and even the average investor. The "tens of millions of dollars in losses" mentioned in TFA are coming from liquidated brokerage accounts. The SEC is in a panic to shore up or stop this exploit by suspending trading on pump/dump stocks. They're hoping to stem the hijacking of retirement funds by stopping the ability to get the money out.

See, when you view it through the proper perspective, within this greater context, now it makes sense as to why the Russian spammers and bot masters have suddenly gotten involved in the game.

I personally have communicated with the scammers & spammers, some of the conversations I have written about on my site [appiant.com], which includes screenshots of bank accounts that have been compromised by phishing, etc.

Re:

[HappyEngineer]

I'm confused. At what point do they get money out of that process? You said "They don't need to worry about transferring money out of the compromised brokerage accounts", but if they're just using the accounts to pump the stock then wouldn't they still leave a trail back to themselves since they would have needed to own the stock in one of their own accounts in the first place?

The authorities would just need to look at the owners of these stocks who owned the stock before the hype and then see who sold duri

Re:

[JRHelgeson]

HappyEngineer asks some good questions, first:

...if they're just using the accounts to pump the stock then wouldn't they still leave a trail back to themselves since they would have needed to own the stock in one of their own accounts in the first place?

FiniteElementalist does an excellent job answering the question; I'll just recap in my own words:
The criminals/spammers/phishers purchase up the penny stocks using legit accounts starting at the time of the Pump/Dump email.
They watch the price rise, then sell off their shares.

HappyEngineer's continues:

The authorities would just need to look at the owners of these stocks who owned the stock before the hype and then see who sold during the hype. One time would be a coincidence, but if they were found doing that more than once then it'd be awfully suspicious.

The third key component is disguising their activities, which is mixed in with the thousands of other "day traders" throughout the US and all over the world. No

Why is bullishalerts.com still around?

[mumblestheclown]

If you do research (via google) on almost any stock spam email you get, you will undoubtedly find yourself either at or reading a press release by 'bullishalerts.com'. For the life of me, I don't understand why this company / website still exists. It's clearly somehow intimately related with the spam as this place just happens to put out and then widely distribute through the web (as opposed to email) all sorts of press releases and other nonsense coiincidentally timed with waves of equivalent spam. the thing is, this is not some website in Nauru - they claim to have an office in downtown Philadelphia. The website, complete with vague nonsense crap and 8th grade writing sort of hints at the caliber of people running it - so why in hell hasn't the FTC or SEC done something?

Re:

[BillX]

Heh. I misread that as "bullshitalerts.com" 'Til I googled it I was thinking, "but why would the SEC shut down a site debunking all the spam touts?..."

I am no brain surgeon but

[Dragged Down by the]

Can't the SEC monitor the individuals who buy these penny stocks advertised by spammers? Compile a list for each stock. Those individuals who appear repeatedly would be the spammers, n'est-ce pas?

New spam spotted!

[140Mandak262Jamuna]

Dear Esteemed President or CEO of Tiny Company, USA,

My name is Oolong Mgobotu, a large scale SPAM operator from Nigeria. Please remit 100,000$ to the secret numbered 102-3459-949-222 account in Cayman Island. Or we will blast SPAM touting you stock to millions of US email addresses. Your stupid SEC will suspend trading on your stock and you will become a micro-penny stock. sincerely,

Oolong Mgobotu, BAR-at-Law, Adis-A-Baba, Nigeria.

Another scenario would be for the spammers to short the stock and the

all the sec has to do it

[night_flyer]

set up a honeypot, see what spam is coming in to see which stock is being pumped, then halt it on the spot.

Re:

[-brazil-]

Isn't it a moral imperative in a capitalistic society for the smart to profit off the stupid?

No. Capitalism concerns itself with economical imperatives, not morals. What you're thinking about is Social Darwinism. The two are not the same, despite the attempts of many to blur the distinction.

Re:

[iamcf13]

I would suggest that if we could develop our humility and humanity to the same level as our technical skills, we would benefit from a more gratifying life.

That won't happen as long as greed, advertising, inflation, and 'consumer culture' exist in this world.

All 4 are chiefly responsible for the extreme wealth disparity in this world.

The people that suffer the most are the 'working poor' / unemployed in 'first world' nations.

Abundance surrounds them but they don't have the opportunity or resources (if at all