It's nice to see some good news. InformationWeek reports on four men who pleaded guilty to e-mail-based pump-and-dump schemes. The story names the criminals, who face a maximum of five years in prison and $250,000 fines when they are sentenced in federal court in Alexandria, VA.
In addition to providing a welcome moment -- and not the only one, we should point out -- the story offers good details on how these schemes operate. The basic outlines are well known, and this case is fairly typical. The crooks approached private companies that needed cash and offered to help them raise it by selling stock. They bought substantial positions in the companies -- 15 were targeted in this scheme -- and used various methods to raise the share price, including buying and trading among themselves to make it seem that the company was active. The criminals often won control of the companies.
The scheme also involved millions of spam e-mails with fraudulent claims. This is a main reason the price would go up. When it reached its highest, the criminals would sell at a great profit. The stock, of course, would then plummet.
The pernicious nature of spammers is that they often combine techniques. For instance, Postini said in August that that pump-and-dump is being combined with PDF spam. This led to a spam spike of 445 percent one day early last month. In the same story, a representative of Sophos said that the company intercepted 500 million PDF spams hyping a particular company one day during the month.
The price of the company -- Prime Time Group -- rose 84 percent. Its management said that it had nothing to do with the campaign and issued a Non Objecting Beneficial Owners (NOBO) list, which is used to track down people who violate market rules during periods of great share price fluctuations.
BitDefender weighs in via this VNUnet.com piece. The company does a bit of forensic accounting on the composition of spam so far this year. It says that pump-and-dump accounted for 75 percent of all image spam. More than half of text spam (56 percent) hyped weight loss and sexual enhancement products. The story mentions new approaches evident this year, such as hosted-image spam.
This MSNBC piece carries the ominous reminder that pump-and-dump spam is spreading to text messaging. In late August, the piece says, a penny stock of a Nevada company was pushed through messages sent to cell phones. In some cases, the receiver of the text message actually has to pay for the call (how's that for adding insult to injury) and in others it reduced the number of messages the subscriber can receive during the month.
The fight against pump-and-dump and other types of spam will never be won, of course. E-mail is too cheap to send, its reach is too ubiquitous and people are too gullible. The best the industry can hope for is to battle the bad guys to a draw. That realistic assessment, however, shouldn't stand in the way of enjoying the bits of good news that crop up from time to time -- such as four guilty pleas.