March 8, 2007 6:10 PM PST

SEC goes after stock spammers, hackers

The Securities and Exchange Commission has taken action against alleged stock promoters and hackers thought to have broken into trading accounts.

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.

See more CNET content tagged:
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10 comments

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About time
The SEC needed to do more to stop this market manipulation about five years ago, before it got so out of control.
I used to work for an online brokerage, and these scams cause endless trouble: Damage control ate up most of my days.
Posted by Marcus Westrup (630 comments )
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I agree
These spam campaigns are basically a notice of intent to defraud. They should definitely be investigated.
Posted by larryc92039 (41 comments )
Link Flag
A Fool and His Money...
Anyone stupid enough to buy a stock based on a spam was bound to lose the money somehow. This is tilting at windmills.
Posted by solrosenberg (124 comments )
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Agreed
Anyone dumb enough to buy ANYTHING from SPAM only adds to the problem. I say we start prosecuting the people buying the crap too.
Posted by thenet411 (415 comments )
Link Flag
Disagree
The real problem with "pump and dump spam" is that actually some of the pepole that join this game win. It is money changing hands. Some win, some lose. If you bought the stocks at a price that's too high then somebody sold it at this price, and if you sold it at a price too low then someone has bought it at this price. The spammer has the advantage of controling the "information" so the spammer more often wins. And people that learn the pattern and spread their risks can actually make money from this schemes. And this is the real reason why SEC needed to step in - to prevent the stock exchange from becoming a casino - investment in stocks involves risk, but this calculated risk should be based on real economic info and not on patterns of a game of chance.
Posted by hadaso (468 comments )
Link Flag
Don't suspend trading because of idiots
Don't suspend trading of heavily promoted stock because of idiots who take advice from spam.

I hate spam as much as anyone, as well as these hucksters who "pump and dump" stock. However, the companies being traded are innocent for the most part. They are just small startup companies trying to make a buck.

Instead, follow the money--investigate the heavy traders of the stock.
Posted by danxy (37 comments )
Reply Link Flag
Have you ever seen an legitimate stock in one of these spam campaigns?
I haven't. I say go ahead and suspend them.
Posted by larryc92039 (41 comments )
Link Flag
PRIMENEWS !!!!!!!!!!!!!!!!!!!!!!!!!!
This news source is a common one that comes up on many services like aol stock market page (and other legitamite sites.
I NOTICED THE STOCK IAUS on all these sites
And apparently this solar panel stock went from .68 to 1.24 in one week and went down in this last correction
IS IAUS a LEGITAMATE stock with legitamate claims or SPAMMED stock that found its way to allegedy a news wire
IS THIS SPAM or is REAL MEAT !!!!!!!!!!
Posted by farkas1 (2 comments )
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