Pump & Dump Stock Scams

by Fred Showker

#179 January, 2006

... you're about to get ripped off

A lot of people out there are looking for a fast buck. There's an entire population of online users who troll the stock markets each day looking for that magic million. Day traders and Penny stockers all have one thing in common: trade a little money in hopes of making big money.

Unfortunately the criminal element online is fully aware of these traders' weaknesses.

What is Pump & Dump?

My stock broker at Wachovia Securities filled me in on all the details, then gave me the name and number of a trusted contact at the Securities Exchange Commission (www.sec.gov) so I could gather more details. The SEC is the government watch-dog for the world of stocks -- to protect the investor and maintain orderly market activities. (Read More.)

According to the SEC, "Pump and dump" schemes, also known as "hype and dump manipulation," involve the touting of a company's stock (typically microcap companies) through false and misleading statements to the marketplace. After pumping the stock, fraudsters make huge profits by selling their cheap stock into the market. (Read More)

It is not known, and extremely difficult to determine who the crooks are -- whether it's the company offering the stock, friends of the company, or unrelated criminals just pumping new emerging companies. According to the SEC, it could be any or all of these perpetrators. When the Pump & Dump scams are delivered as email, it's even more difficult to pinpoint because the spams generally do not advertise a web site as do other spam scams. The fraudsters merely broadcast millions of spams... repeatedly, throughout each day, and then carefully watch that stock as it begins to rise.

Pump & Dump Examples:

  >   Carnegie Cooke & Company, Inc. (CGKY)
  >   A Huge PR campaign is expected starting Wednesday
  >   and all next week so grab as much as you
  >   can up to $0.25 range.

They almost always promise some sort of hype like huge PR campaigns, mergers, buy-outs and other buzz-words to trap the investors' attention.

  >   Infinex Ventures Inc. (IFNX) = OTC: IFNX.OB
  >   This One is Strong UP 0.50 (28.57%) Jan 9th Alone
  >   Huge PR Campaign Running for Tuesday Jan 10th
  >   We expect explosive growth thru Friday

All of these were pumped via illegal spam:
  >   POP3 MEDIA CORP Symbol: POPT
  >   Ever-Glory International Group, Inc Symbol: EGLY
  >   KOKO PETROLEUM Symbol: KKPT
  >   HLV Trading, Inc. Symbol: HLVC
  >   Ever-Glory International Group Inc. Symbol: SEGLY
  >   Satellite Newspapers Corp. Symbol: SNWP
  >   Remington Ventures Inc. Symbol: RMVN
  >   Infinex Ventures Inc. Symbol: IFNX
  >   Goldenway Grment Company, Ltd.
  >   (We'll add more later.)

Although the spammers take great care in masking the sender of the scam, our astute spam/scam trackers are often able to pierce the criminal mask. These are just a few of the domains to watch out for:
* Newsletter Weekly Alert
* Trader's Daily Report
* Smart Money Equities
* Tip Top Equities
* capital-gains.net
* horizontal-spread.com
* FuturesBuzz.com
* DeepDiscountFutures.com,
* Trade10.com
* OTCPicks.com
* 1stOptionsBroker.co.uk
* AnotherWinningTrade.com
* MaximumuASP.com
* FXstreet.com
* www.sjrb.ca (no name)

There were more than thirty of these over the weekend. All were sent from different addresses, supposedly by different people, and most had different subject lines. Here's my SpamCop Stock Scams screen this morning after just 8 hours.

zeros replace oh

Tell-tale signs you're getting pumped

* Multiple posts, same message, different origins
* Replaced characters meant to confuse spam filters (as above)
* No contact, address, site, or reference
* Heavy hype on an impending event in the stock
* Nonsensical gibberish at beginning or end of post
* 80% use Pegasus Mail for Win32

All of these tell-tale signs should warn you and alert you that this message is a scam -- a pump & dump. Ideally, you would normally report these to the SpamCop and/or SEC and your ISP. After using the spams for this article, I immediately reported them to my SpamCop account as well as the SEC, and the FTC. Above all, just delete them!

The most disturbing part of this story is the fact that there is a strong likelihood that these pump & dump schemes are conducted by organized crime or worse yet, terrorists trying to fund covert operations around the world. Since they are virtually impossible to catch, our best first defense is NOT to respond. Period.

My contact at Wachovia Securities says:
      "Very few people ever win at the game these spams want us to believe. Some people may make a few dollars as tides of small caps rise and fall. But at the end of the day, 99% who dabble will get burned."

And that's good enough for me.

* There is a follow-up to this story

thanks for reading

Fred Showker

Don't forget ... we encourage you to share your discoveries with other readers. Just send and email, contribute your own article, join the Design Cafe forums, or follow DTG on Facebook!