Pumping And Dumping Is Much Faster When You Can Do Both Yourself With Hacked Accounts
from the much-more-efficient-that-way dept
Back during the first dot com bubble, the stock pump and dump scam worked by buying some stock, and then sending out a bunch of spam promoting the stock, then quickly selling your own stock. While a lot of the new deluge of spam seems to be trying that same thing (and, apparently, it’s working), some organized crime groups apparently found a much more efficient way of doing things. As mentioned late last year, some scammers hacked a bunch of accounts at various popular online brokers for use in a pump and dump scam. The Washington Post has some more details on exactly how it worked, as the SEC has brought charges against one man involved in the scam. It’s basically exactly what you’d expect. The guy bought a bunch of a certain penny stock with his account. Then logged into a bunch of other accounts, sold all their stock and used the proceeds to buy the stock that he had just purchased, pumping up the price. Then, quickly sell the stock in his own account and cash out. The article details one example of this, where he cleared about $13,000 in less than 2 hours.
Two additional interesting things come out of the article. The first is that at least some of the brokerages seemed to catch on to the fraud pretty quickly (though, not quickly enough). In the example case given, Charles Schwab catches onto the fraud less than 10 minutes after one of their accounts is involved, and blocks another transaction. The other interesting point, is that the Washington Post followed up with a CEO at one of the companies whose stock was pumped and dumped. As we’ve noted in the past, it’s often quite a hassle for those companies, but in this particular case, it’s now made it very difficult, as the fraud helped blow a business deal, and at least one of the brokerages will no longer let anyone trade that stock. Oh yeah, as for the man being charged by the SEC? He fled the country and no one actually seems to know where he is. The money is also long gone.