WASHINGTON -- IT security and control company Sophos today issued a reminder to stock traders about the dangers of "pump-and-dump" financial spam campaigns, following the announcement that the SEC has suspended trading of 35 companies.
The Securities and Exchange Commission, which has dubbed the action "Operation Spamalot," is seeking to offset the negative impact 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 reflects their success at bilking unsuspecting recipients. Moreover, this has had a dramatic, negative impact on the stock price of legitimate companies whose brands are targeted.
"The SEC's ruling is a clear indication of the effect of pump-and-dump scams on the financial community," said Ron O'Brien, senior security analyst with Sophos. "These scams have the potential to cost the economy hundreds of millions of dollars each year in lost stock market value and investor dollars. There are already stiff penalties in place for those convicted of these scams such as high fines and jail time, but this ruling will serve as a further deterrent as it aims to prevent the trades before a scammer can profit."