SEC Halts Trading on Spam Driven Stocks

goombah99 writes "The SEC has taken action to halt transactions on spam-touted stocks. Presumably this opens an opportunity for denial of service attacks on stocks. However, to be effective spam generally must target penny stocks with historically low volumes and thus the actual capitalized market impact or effect on the companies for a temporary shutdown can be expected to be negligible and transient. One example was given of a touted apparel stock jumping from 6 cents to 45 cents over a period of days before settling down to ten cents a share and near 65,000 or about $6500 in transactions (an eighth of the peak share volume, and a 50th of the peak transaction value). In other words, the market distortion of a brief shutdown, even if it were a DOS attack, would be massively less than the integrated spam surge. The thing I found surprising was that for this to be an effective measure with human oversight then the number of such events must be relatively small in number. From the amount of spam I get I'd have guessed it was a tidal wave."

Comments

Too late.

[sakusha]

By the time the SEC decides to act, the pump and dump is already over. These scams happen in the space of a few days. Blocking trading on a group of stocks that have already been pumped and dumped is futile. As the submission suggests, if they could act promptly by blockign trading immediately after a spams, that would effectively be a DoS attack on a stock trading, any spammer could initiate one. The SEC needs to go after the spammers, not the stocks.

Re:What spam?

[McFadden]

Who is to say that others aren't taking advantage of the spammer's work? If you can buy early and sell a day later, I imagine there'd be a lot of profit to be had.

Unfortunately I'm a little thin on the details, but I distinctly remember reading that at least one of the big investment banks has a team that does exactly that. i.e. monitoring the 'net to try and pick up as quickly as possible on pump'n'dump stocks in order to maximize any remaining value from from the spammers activities.

We need a greater context here

[JRHelgeson]

The stock spam and pump-n-dump activities; while they do pose a threat to our financial systems, these actually represent the last step(s) in the chain for some very serious and very brilliant criminal activities. There is a much, much bigger story going on here that the public are not being told about.

Permit me to break it down for you:
The Phishers will phish usernames and passwords for brokerage accounts, or they will collect the information from personal users by means of a trojan. The criminals log into these accounts and schedule sell orders for whatever stocks they are holding, and schedule buy orders for the penny stock they are going to pump-n-dump. Then they walk away.

They execute the spam, eager traders read the spam, look at the account and see that volume of shares purchased have been bought up in the past n-hours and they jump in. The pumpers have bought their stock before hand and once the volume peaks, they dump. The account holders whose accounts were compromised are left holding the pumped-dumped stock...

The criminals are getting GOOD! They don't need to worry about transferring money out of the compromised brokerage accounts, they are stealing the money and laundering it all in the same step.

And it should be no big surprise that the criminal organizations behind the whole operations is the Russians.

Welcome to professional bank robbery in the 21st century.

*NOW* this is not to say that the traditional "boiler rooms" don't exist. They most certainly do and they continue to pose a serious problem which the SEC has addressed for many years. What is new is this most recent innovation that targets retirement accounts, day traders and even the average investor. The "tens of millions of dollars in losses" mentioned in TFA are coming from liquidated brokerage accounts. The SEC is in a panic to shore up or stop this exploit by suspending trading on pump/dump stocks. They're hoping to stem the hijacking of retirement funds by stopping the ability to get the money out.

See, when you view it through the proper perspective, within this greater context, now it makes sense as to why the Russian spammers and bot masters have suddenly gotten involved in the game.

I personally have communicated with the scammers & spammers, some of the conversations I have written about on my site, which includes screenshots of bank accounts that have been compromised by phishing, etc.