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Last Updated: Tuesday, 5 September 2006, 11:50 GMT 12:50 UK
Firms targeted in spam share scam
Wall St sign
The US financial regulator has warned about "pump-and-dump"
Spammers hoping to manipulate the stock market have begun approaching firms, offering to raise their share price in exchange for a percentage fee.

Security experts at Sophos say they have uncovered an e-mail offering a free one-day trial to company bosses.

So-called "pump-and-dump" spam asks recipients to buy cheap shares, which then rise in value, making money for spammers who already hold stock.

Sophos says the scam has grown from 0.8% to 15% of spam since early 2005.

Recent research by academics in the UK and the US into share spamming revealed that recipients of spam e-mails could lose 8% of their investment in just two days.

Conversely, spammers who already hold stock in the companies they "pump" could see a return of between 4.9% and 6% for their efforts.


Sophos, which offers security services for businesses and tracks trends in spam, viruses and spyware, said the discovery of e-mails aimed squarely at businesses was a "new twist" in pump and dump fraud.

In an e-mail posted on Sophos' website, companies are told that they can boost their own share price by up to 250% within weeks.

Sadly many people will believe things told to them via an email which they would find implausible face-to-face
Graham Cluley
The spammers offer a "free one-day trial" to demonstrate the effectiveness of their methods.

The badly spelt and poorly punctuated e-mail in fact offers two services in one go: "boosting" the company's own share price, and offering "information" about other prospective share price rises.

"Not only do these crooks boost their own share price by artificially playing the market, but now they have the audacity to try to get paid for it by the companies involved," said Graham Cluley, senior technology consultant at Sophos.

If companies are tempted to take up the offer - which in most jurisdictions would breach financial trading regulations and make them party to a fraud - they can then extend the arrangement, paying a fee of 6% of the daily volume of shares traded.

Mr Cluley said small or struggling companies, mostly in the US, could certainly be tempted by the "offer".

"Sadly many people will believe things told to them via an email which they would find implausible face-to-face," he said.

Trading culture

Despite being a problem since the early days of the internet and e-mail, spam remains a key concern in online security.

Example of a company share price artificially boosted by spam. Source: Sophos
The growth of stock market-related spam is causing concern, Mr Cluley said, because of the temptation to lure unsuspecting people into potentially illegal activities.

A majority of spam still offers items for sale, pornography or sex- and medical-related products.

But Mr Cluley suggested that a long-standing north American culture of small-time day-trading has encouraged spammers.

Millions of domestic e-mail clients allow automatic downloading of HTML e-mails that contain graphics which may link to spam.

Security firms advise users to use a spam filter, delete unsolicited messages and never respond to offers.

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