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02:29 PM

SEC Settles With Stock Spammers

Agreement calls for two Houston men to pay about $3 million to the government.

The Securities and Exchange Commission has announced a settlement with two Texas men it says used spam to inflate the value of stocks they owned.

The SEC said Thursday that Darrel Uselton will pay about $3 million in the settlement. He and his uncle, Jack Uselton, of both Houston, also agreed to stop trading penny stocks.

The Useltons have not admitted or denied the accusations. Instead, they agreed to stop participating in penny stock offers and pay $2.8 million restitution to the state of Texas and another $1 million in penalties. The pair is also in the process of settling criminal charges brought by the Texas Attorney General's Office.

In 2007, the SEC accused the two men of hijacking computers around the country to engage in an e-mail campaign to drive up demand for their low-value stocks. The SEC said that some e-mail messages were sent to a staff attorney at the SEC. The first one contained a subject line that said: "Experts are jumping all over this stock."

The SEC said the Useltons obtained more than $4 million by buying cheap stock, then manipulated trading with spam, direct mailings, and Internet promotions. The SEC matched the spam to the pair's brokerage accounts and concluded they received the stocks in return for promoting them.

The SEC worked with authorities in Texas, Oklahoma, and Colorado; the FBI; and the National Cyber-Forensics & Training Alliance. Three brokerage firms have faced disciplinary actions, while four penny-stock companies have had to suspend trading as a result of the investigation, the SEC said.

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