What are pump & dump schemes?
In a typical pump and dump scheme, spammers buy cheap stocks, then send out huge volumes of fake stock
emails in an attempt to inflate the price of the stock. Because the spam campaign encourages people to buy the
stock, the stock price goes up, and the spammers then sell their stock at a large profit.
A huge part of spam
In 2006, stock spam made up only about 5 percent of all spam email messages, but a year later it had become the biggest spam category, topping the spam list ahead of drug, porn and phishing spam. Pump and dump spam campaigns accounted for between 25 and 35 percent of the world's spam in 2007.
And the reason is obvious – the money is good. A 2006 study from researchers at Oxford University and Purdue University showed that a spammer can make a 5 to 6 percent return in just a few days from stock hyped via spam. Another 2006 study found that the price of stock touted by spam mail increased by 1.7 percent on average on the day the spam was first received. On the following day, the price dipped 0.9 percent on average.
Now in Europe too
In March 2007, the Securities and Exchange Commission in the US suspended trading in the securities of 35 companies that were heavily promoted in spam email campaigns. March 2007 also saw the first big pump and dump spam campaign hit Europe after having been mostly an American problem up until then.
In June 2007, a major spam outbreak hit the Internet, causing the stock it was pumping to jump 20 percent in trading volume. The spam blast – cleverly designed to look like a professional investment newsletter – represented 8 percent of all spam sent that day – roughly 5 billion messages.
In July 2007, US authorities filed charges against two Texas men for an alleged pump and dump scheme that cost investors US$ 4.6 million. The duo was suspected of using a network of compromised zombie PCs to distribute pump and dump junk mails and Texas criminal authorities seized more than US$ 4.2m from bank accounts associated with the suspects.
In August 2007, a large-scale pump and dump scam caused a 53 percent surge in the amount of spam. Spam email messages attached with a PDF file were sent to email inboxes worldwide and the share price of the targeted company climbed 20 percent.
In October 2007, the Storm Worm botnet network sent out 15 million audio spam messages. The stock of the company targeted was trading around US$ 0.41 on October 18, the day after the spam had started, and on October 30 it closed at $ 0.20.
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