Application security

SEC halts trading of 35 stocks for pump-and-dump scams

The Securities and Exchange Commission (SEC) today halted trading on shares of 35 companies believed to be involved in recent pump-and-dump spam campaigns.

The decision was part of "Operation Spamalot," an agency effort to protect investors from stocks that have been hyped through mass unwanted mail.

Junk mailers purchase penny stock and then use subject headings such as "Ready to Explode" and "Fast Money" to dupe recipients into also purchasing shares. The stocks rise dramatically and then spammers sell their shares for a quick and substantial profit, while, many times, the investors are left holding a sinking ship.

"When spam clogs our mailboxes, it’s annoying," SEC Chairman Christopher Cox said today in a news release. "When it rips off investors, it's illegal and destructive. Today’s trading suspensions, and actions that will follow, should send a clear message to spammers: the SEC will hold you accountable."

The trading suspensions will last 10 days – and they will likely keep the spammers from cashing in on their scam, Paul Henry, vice president of technology at Secure Computing, told today.

"You’ve got the uninformed out there thinking they’re getting some kind of hot tip," Henry said. "It’s really targeting the gullible and the greedy. It’s gotten way out of hand and I think this is the SEC’s best effort at trying to reign in the problem."

Apparel Manufacturing Associates, Goldmark Industries and Healtheuniverse Inc. are among the 35 companies declared off-limits to traders, the SEC said. The firms are listed on the so-called pink sheets, reserved for companies that do not meet the minimum threshold required to be traded on a national exchange, such as the New York Stock Exchange.

In the example of Goldmark, its stock was valued at 17 cents right before a spam campaign started in December. About 10 days later, the stock rose 152 percent. Two weeks later, it was worth just 15 cents.

Click here to emal reporter Dan Kaplan.

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