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Pump and dump spam targets the pumped and dumped


Email-promoted share fraud schemes are beginning to seek the participation of companies whose shares will be 'pumped and dumped' by spammers. A security firm has identified a new trend which makes companies party to the scam.

Security company Sophos, which tracks viruses and spam, said that it is seeing a growing number of emails seeking firms' participation.

Pump and dump scams involve spam with a tip for a low-priced share. The email will tell recipients that that share is about to rise in price, and that recipients should buy it before it does.

If enough recipients do buy the share then the scammers, who have bought at low pre-scam prices, can sell shares at a profit. The company whose shares are being traded is typically unaware of the scam until it sees dramatic movements in the trading of shares.

Sophos said that spammers are now looking to involve the firms themselves. "You own an underrated stock and the market price of your stock is from 0.001 to 1$," reads a typical email published by the company. "We can increase the price of your stock and we can increase average day trading volume. We can increase price up to 200–250% in 2–3 weeks and also we can increase volume by 10 times each trading day. You don't have to pay anything in advance. First we increase the price and the volume, then you pay."

The scam can cause havoc with the business whose shares have been targeted and leave investors severely out of pocket. But the danger of pump and dump schemes is that they can become self-fulfilling since if enough people fall for the scam the share price does actually rise as predicted.

"Not only do these crooks boost their own share price by artificially playing the market, but now they have the audacity to try and get paid for it by the companies involved," said Graham Cluley, senior technology consultant for Sophos. "This twist also sees the scammers offering information on upcoming stock manipulations to investors."

"By actively manipulating stock prices by sending bogus information out via junk email, they have an insight into which shares are likely to shift position next. Investors must avoid these offers at all costs, as they may find themselves caught out in a criminal sting which leaves them out of pocket," said Cluley.

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