March 8, 2007 6:10 PM PST
SEC goes after stock spammers, hackers
The SEC suspended trading Thursday in the securities of 35 companies that were heavily promoted in spam e-mail campaigns, it said in a statement. The trading suspensions, the most ever aimed at spammed companies, were ordered because of questions about the adequacy and accuracy of information about the companies, it said.
Earlier in the week the SEC won an emergency court order freezing assets in a Latvian-based bank's trading account that allegedly was used in "pump and dump" manipulation of shares in 15 different companies, the SEC said in a separate statement Wednesday.
As part of the pump-and-dump scheme, online brokerage accounts at seven firms were breached and used to manipulate the market and boost the price of specific stocks, the SEC said. Through this technique, the unknown hacker-traders generated $732,941 in illicit profits and cost U.S. brokerages some $2 million in losses, the SEC said.
The SEC action to freeze the assets is the third filed in as many months involving market manipulation schemes conducted through online account intrusions. In the past the SEC has also taken action against individuals who allegedly broke into financial news Web sites or news release services.
The Thursday trading suspensions are part of an SEC effort code-named "Operation Spamalot." The effort seeks to shield investors from the potentially fraudulent spam e-mail campaigns that hype penny stocks. The SEC estimates that 100 million such e-mail messages are sent every week, triggering spikes in share prices and trading volume. Investors lose their money when the spam campaign stops, according to the SEC.
"When spam clogs our mailboxes, it's annoying. When it rips off investors, it's illegal and destructive," SEC Chairman Christopher Cox said in a statement.
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