Consumer Fraud Reporting
Stock Scam
Reporting on the Latest Frauds, Scams, Fake Lotteries, Spams and Hoaxes

 

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Stock Alert Scams

Have you received an email from that looks like a grainy image telling you about a great stock that is "about to explode", "rocket through the roof" or is "hot"? It is a scam.  Commonly called pump-and-dump, it is an old scam using the new technology. Usually, the stocks recommended are real U.S. penny stocks.

Pumping and dumping is one of the oldest and easiest cons around.   Basically, the scammer buys some cheap penny stocks, sends out hundreds of thousands of emails like the one you received, waits for enough gullible idiots to buy some of the stock to drive up the price, and then sells his stock at a profit.  In one sample case provided by the SEC, a scam involved shares of Apparel Manufacturing Associates Inc.. the stock went from 6 cents, on trading volume of 3,500 shares one day in December 2006 to over 19 cents per share on a volume of 484,568 shares by the next business day. And two days later, it hit 45 cents a share. But a week later, after the scammer sold out, Apparel Manufacturing stock was back down to 10 cents on volume of 65,350.

Since the scammer can be anywhere on the planet, and there is no connection between the investors and the scammer other than the one scam email, there is nothing to lead a trail back to the perpetrator. The victims buy the stock through their usual stock trader, Etrade, Ameritrade, Scott Trade or their analyst.

And since there are thousands of penny stocks on the U.S.-based OTC Bulletin Board, which is a share price quote service for companies that don't meet the stiffer requirements of major stock exchanges, or on "Pink Sheets".

It is estimated (according to Commtouch, an international e-mail security firm) that of the 160 billion email messages a day in 2006, 90% are spam, and of those, other research suggest that 15% (or 21 billion emails per day) are stock scams.

To avoid spam-filtering software, the scammers deliberately misspell words that the filters look for and use image files (JPEG or GIF files) to present the text as a pictures. And if you look closely at repeated e-mails touting the same stock, the words may be jiggled or appear in different sizes.

To send so many spam emails, the scammers use zombie computers: they use a botnet-herding viruses and worms infect ordinary people's computers and then send spam from them, unknown to the owner (they only may notice that their computer has slowed down). One bot found by the U.S. Department of Homeland Security was sending e-mails from 226,525 computers.

Authorities are trying to catch the spammers. In January, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Aleksey Kamardin, a 21-year-old Florida college student who they say made $82,960 in six weeks by manipulating 17 stocks. He bought shares in target companies, then hacked into victims' online investment accounts, sold their stocks and bought more shares in the targets. That drove up share prices, after which Kamardin then sold his stock. He wasn't captured though - it is reported that he fled to Russia.

The SEC announced Operation Spamalot in early 2007, which suspended trading for 10 days in 35 Pink Sheet companies that had been touted in pump-and-dump schemes.

The bottom line: don't buy stocks based on emails you receive from strangers! (May we say "duh!" ?)

Companies recently used in pump-and-dump scams:

Advanced Powerline Technologies Inc., America Asia Petroleum Corp., Amerossi International Group Inc., Apparel Manufacturing, Asgard Holdings Inc., Biogenerics Ltd., China Gold Corp., CTR Investments & Consulting Inc., DC Brands International Inc., Equal Trading Inc., Equitable Mining Corp., Espion International Inc., Goldmark Industries Inc., GroFeed Inc., Healtheuniverse Inc., Interlink Global Corp., Investigative Services Agencies Inc., iPackets International Inc., Koko Petroleum Inc., Leatt Corp., LOM Logistics Inc., Modern Energy Corp., National Healthcare Logistics Inc., Presidents Financial Corp., Red Truck Entertainment Inc., Relay Capital Corp., Rodedawg International Industries Inc., Rouchon Industries Inc., Software Effective Solutions Corp., Solucorp Industries Ltd., Sports-stuff.com Inc., UBA Technology Inc., Wataire Industries Inc., WayPoint Biomedical Holdings Inc. and Wineco Productions Inc.

For more information, visit the Securities and Exchange Commission website.

And if you have any information related to stock spams, email the SEC at 35suspensions@sec.gov.

Below are some typical examples of these scam pump-and-dump stock scams:

Sample Stock Scam Emails:

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Copyright CFR 2005, 2006, 2007, 2008, 2009  - Definition of scam, fraud, etc. -  Legal disclaimer / corrections / complaints  -  Privacy Policy
Names used by scammers in the examples on this page and others often belong to real people and businesses who often have no knowledge of nor connection to the scammer's use of their name and information.  Sample scam emails and other documents are copies of the scam to help potential victims recognize and avoid it.  You should presume that any names used and presented here in a scam are either fictitious or used without their legitimate owner's permission.
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