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08 Mar 2007

SEC suspends trading on 35 "pump-and-dump" companies

Spam spread bogus investment advice

IT security and control company Sophos has reminded stock traders of the danger of "pump-and-dump" financial spam campaigns, following the announcement that the SEC has suspended trading of 35 companies.

The Securities and Exchange Commission, who have dubbed the action "Operation Spamalot", are hoping to neuter the success of hundreds of millions of spam messages sent each week containing bogus investment information.

Spammers are spreading realistic-looking short term 'investment advice' in the hope of pumping a stock enough to offload their own shares at a profit. The increasing quantity and sophistication of pump-and-dump campaigns suggests that there is plenty of money to be made. Of course, the companies which were talked up, and their legitimate investors, are left to bear the after-effects of the stock dump.

"The SEC won't have made a decision like this lightly. They are clearly worried that investors are in danger of being conned by the commonly encountered spam campaigns to invest in usually fairly comatose penny stocks," said Graham Cluley, senior technology consultant at Sophos. "The fortunes which can be made through "pump and dump" campaigns are enormous, and - if caught - those responsible for the stock market manipulation can receive substantial fines and jail sentences."

An example of a stock pump-and-dump spam

An example of a stock pump-and-dump spam offering investment advice in Goldmark Industries, one of the companies which has had its trading suspended.

According to Sophos experts, the public needs to learn to never trust an anonymous internet tipoff, and to exercise more caution about which companies they choose to invest in.

"You wouldn't necessarily believe a tip given to you by a stranger on the bus, so why would you give credence to an email that arrives from nowhere out of the blue?", continued Cluley. "Organized activity by spammers and hackers requires a co-ordinated defense to protect the wallets of innocent traders. It will be interesting to see if the SEC takes more proactive action to defend investors like this by suspending trading in specific penny stocks in future."

The 35 companies who have had trading suspended until 11:59pm, EDT, on March 21 2007 are: Advanced Powerline Technologies Inc. (APWL), America Asia Petroleum Corp. (AAPM), Amerossi Int'l Group, Inc. (AMSN), Apparel Manufacturing Associates, Inc. (APPM), Asgard Holdings Inc. (AGHG), Biogenerics Ltd. (BIGN), China Gold Corp. (CGDC), CTR Investments & Consulting, Inc. (CIVX), DC Brands International, Inc. (DCBI), Equal Trading, Inc. (EQTD), Equitable Mining Corp. (EQBM), Espion International, Inc. (EPLJ), Goldmark Industries, Inc. (GDKI), GroFeed Inc. (GFDI), Healtheuniverse, Inc. (HLUN), Interlink Global Corp. (ILKG), Investigative Services Agencies, Inc. (IVAY), iPackets International, Inc. (IPKL), Koko Petroleum Inc. (KKPT), Leatt Corporation (LEAT), LOM Logistics, Inc. (LOMJ), Modern Energy Corp. (MODR), National Healthcare Logistics, Inc. (NHLG), Presidents Financial Corp. (PZFC), Red Truck Entertainment Inc. (RTRK), Relay Capital Corp. (RLYC), Rodedawg International Industries, Inc. (RWGI), Rouchon Industries, Inc. (RCHN), Software Effective Solutions Corp. (SFWJ), Solucorp Industries Ltd. (SLUP), Sports-stuff.com Inc. (SSUF), UBA Technology, Inc. (UBTG), Wataire Industries Inc. (WTAF), WayPoint Biomedical Holdings, Inc. (WYPH), and Wineco Productions Inc. (WNCP).

The SEC is inviting any broker-dealer, investor, or other person with information relating to the investigation to email them at 35suspensions@sec.gov.

Sophos recommends companies protect themselves with a consolidated solution which can defend against the threats of spam, spyware and viruses.

About Sophos

More than 100 million users in 150 countries rely on Sophos as the best protection against complex threats and data loss. Sophos is committed to providing complete security solutions that are simple to deploy, manage, and use and that deliver the industry's lowest total cost of ownership. Sophos offers award-winning encryption, endpoint security, web, email, mobile and network security solutions backed by SophosLabs - a global network of threat intelligence centers.

Sophos is headquartered in Boston, US and Oxford, UK. More information is available at www.sophos.com.