The pump-and-dump stock spam gang face hefty jail sentences.
IT security and control firm Sophos has welcomed news that four
men have pleaded guilty to being part of an international gang that
used spam to manipulate the stock market, raising more than $20
million from investors.
According to the US Department of Justice, 47-year-old Michael
Saquella (also known as Michael Paloma), 63-year-old Lawrence
Kaplan, 38-year-old Henry Zemla and Justin Medlin, were members of
a gang which spammed out fraudulent news stories to create
artificial demand in stocks, pumping up the share price of 15 small
companies (Beverly Hills Film Studios; Body Scan; Cor Equity
Holdings; Courtside Products; eDollars, IFINIX; Integrity
Messenger; Latin Heat Entertainment; Motion DNA; PokerBook Gaming;
TKO Holding; Trans-Global Holdings; V3 Global; Xtreme Technologies;
and Zuma Beach Entertainment).
The pump-and-dump gang then sold off their stock, netting more
than $20 million in profits, some of which was shared with the
companies that were having their share prices manipulated.
Astonishingly, these firms were involved in the operation, although
it is not believed they realised anything illegal was taking
place.
26-year-old Medlin, from Paris, France, was one of the people
hired by the rest of the gang to send out the spam messages.
Sophos experts report that pump-and-dump stock campaigns like
this account for approximately 25 percent of all spam, up from 0.8
percent in January 2005.
All four men have pleaded guilty to counts of fraud and are
facing between 5-10 years in prison when sentenced later this year.
Saquella and Kaplan have also admitted multiple Securities and
Exchange Commission (SEC) violations. Three other defendants,
Steven P. Luscko, Gregory A. Neu, and Brian G. Brunette, have
already been sentenced to between 1-5 years in prison.
Pump and dump stock campaigns work by spammers purchasing stock
at a cheap price and then artificially inflating its price by
encouraging others to purchase more (often by spamming "good news"
about the company to others). The spammers then sell off their
stock at a profit. Sophos experts report that pump-and-dump stock
campaigns account for approximately 25 percent of all spam, up from
0.8 percent in January 2005.
"The facts of this case should make it clear to everyone that
there are fortunes to be made from spam, but that the penalties if
caught are considerable," said Graham Cluley, senior
technology consultant at Sophos. "Pump-and-dump spam is a scourge
in people's inboxes - not only does it clog up email servers but it
risks putting the livelihoods of innocent individuals and small
businesses in jeopardy."
According to Sophos, the public must also learn to exercise
caution when deciding which companies to invest in and must learn
to never trust an anonymous internet tipoff.
Earlier this year, Sophos reported how the
US Securities and Exchange Commission (SEC) had suspended trading
in 35 companies as they were found to be commonly referenced in
pump-and-dump stock email campaigns.
In July, Sophos published
its Security Threat Report, examining the latest trends in spam,
malware and hacking.
Sophos recommends companies protect themselves with a consolidated solution which can control network access and defend
against the threats of spam, hackers, spyware and viruses.
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 security and data protection solutions that are simple to manage, deploy and use and that deliver the industry's lowest total cost of ownership. Sophos offers award-winning encryption, endpoint security, web, email, and network access control solutions backed by SophosLabs - a global network of threat intelligence centers. With more than two decades of experience, Sophos is regarded as a leader in security and data protection by top analyst firms and has received many industry awards.
Sophos is headquartered in Boston, US and Oxford, UK. More information is available at www.sophos.com.