by Mike Masnick

Filed Under:
pump and dump, scams, spam

Do We Really Need Software To Catch Pump And Dump Stock Spammer Transactions?

from the is-it-that-difficult? dept

A few years ago, there was a study that showed that pump-and-dump stock spam scams actually made money for the scammers. However, what no one has been able to explain is why it isn't easy to track down those responsible. Just find out who bought a bunch of the stock just before the spam went out -- and who sold it all as others started buying up the stock. Sure, it's likely that scammers will try to cover their tracks, somewhat, but it shouldn't be that hard to track down who bought and sold early. In fact, it seems like it would be rather easy. So while we appreciate efforts like this new software that tries to notice such a pump-and-dump in action and alert traders of a potential issue, it's still not clear why this is really an issue at all. It still doesn't explain why we're simply not going after those who made money from the pump-and-dump scam in the first place. And, of course, there's the flip side of the argument: if you're suckered into buying a penny stock based on a spam email, some might say you deserve to lose your money.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Dow Jones, Aug 12th, 2008 @ 4:47am

    It's To Send A Message

    Whatever the reason, the vermin that send this stuff are spammers, and that's a fact. Like all spammers, they should be tracked down, arrested and and have an unfortunate "accident" while being held for trial.

    I had two of my domains used as a return address during a pump and dump spam campaign during 2006. The amount of backscatter and angry emails I received was staggering.

    Here's the solution - catch spammers, shoot them against a wall and make the suckers that paid them money clean up and bury the dead bodies.

    reply to this | link to this | view in thread ]

  2. identicon
    Pseudonym, Aug 12th, 2008 @ 4:57am

    Whatever you think of those who are suckered into buying stock based on spam, the small-to-medium-sized businesses which are unwittingly targeted in the scam don't deserve what they get.

    reply to this | link to this | view in thread ]

  3. icon
    Ferin (profile), Aug 12th, 2008 @ 5:10am


    Seems like this is more of an attempt to catch a pump and dump as it happens and prevent it from going further, rather than just catch the perpetrators afterwards and try to clean up the mess. It may be easy to find the jerks that did it after the fact, but sometimes (depending on jurisdiction) it's tough to catch and punish them. Not to mention the problems it can create in the market, and for the investors that got duped and screwed. Better to try and catch it and stop it before it becomes a problem.

    reply to this | link to this | view in thread ]

  4. identicon
    Anonymous Coward, Aug 12th, 2008 @ 5:18am

    Huh? Defending the pump and dumpers? I don't understand that. The spam they generate costs a ton of money. The people who get scammed are probably unsophisticated, but that doesn't necessarily mean that they deserve to lose their money. People assume the target company is involved, but they usually are not. For them it can be devastating.

    It is possible to hide a money trail. It isn't easy to do well, but it can be done.

    Trying to spot the tell-tale trades that precede the scam seems like a good idea. I imagine there would be quite a few false positives, but it is worth trying to catch such an operation early. It might be just another speed bump for the scammers, but enough speed bumps might encourage the scammers to move to another form of scamming.

    reply to this | link to this | view in thread ]

  5. identicon
    Anonymous Coward, Aug 12th, 2008 @ 5:44am

    It might not be so easy . . .

    Having some luck in the market is not a crime in and of itself. You actually need some proof of an individual knowingly committing a crime to prosecute them for it (with some very rare exceptions). Simply benefiting from the crime is suspicious, but it’s hardly conclusive.

    reply to this | link to this | view in thread ]

  6. identicon
    Sammy, Aug 12th, 2008 @ 6:00am

    Taking advantage, umm.. a risk

    There are those that attempt to take advantage of pump and dump scams by buying when they see them start and TRYING to sell before they get burned themselves. There's a lot more risk than the scammer faces but I've read of a few that made pretty good profits. I also remember reading of one very active person a few years back that was confronted by the SEC but was left to continue his activities when they realized he wasn't the scammer.

    reply to this | link to this | view in thread ]

  7. identicon
    Jim, Aug 12th, 2008 @ 6:10am

    Re: Prevention

    I think Mike's argument is that catching and punishing perpetrators will deter future criminals. If pump/dumping has a 95% of getting caught with strict penalties you aren't likely to see many scams at all. If, however, no one is getting busted the reward/risk ratio is too good for some to ignore.

    This effort to stop an in-process scam doesn't focus on catching the criminal. So the reward/risk ratio stays very high. This plan won't remove the strong incentive to give it a shot.

    reply to this | link to this | view in thread ]

  8. identicon
    Chuck Norris' Enemy (deceased), Aug 12th, 2008 @ 8:04am

    More spam?

    alert traders of a potential issue

    A spam message to tell you about potential spam. That's great!

    reply to this | link to this | view in thread ]

  9. icon
    Ferin (profile), Aug 12th, 2008 @ 8:49am

    Re: Re: Prevention

    Not sure I follow you on this. I would assume if the software is capable of catching a pump and dump in process (obviously a bit of an unknown) one could use the data to figure out who was runnign things up. I don't think preventing a pump and dump scheme from playing out fully necessarily precludes catching the people trying to do it as well.

    I agree effort should be focused on catching the perpetrators as well as stopping the schemes. As I metnioned though; punishing these people may not always be possible, and after the fact punishments don't always do much to clean up the mess.

    I guess my point was that in scams like this where the perpetrators may not always be as easy to catch, I don't think there's anything wrong with working on shutting down the scheme alongside increasing efforts to go after the guys that pull it off.

    reply to this | link to this | view in thread ]

  10. identicon
    A. Coward, Aug 12th, 2008 @ 9:51am

    "It's unethical to let a sucker keep his money."

    reply to this | link to this | view in thread ]

  11. identicon
    Anonymous Coward, Aug 12th, 2008 @ 10:52am

    I second the idiot vote for liberals who continue to insist that Bush makes and passes laws. Go back to school and learn that laws are made and passed by the other two branches of government...although I am pretty certain he is to blame for everything else wrong in my life because I lack the ability to do anything but blame him when life isnt perfect.

    reply to this | link to this | view in thread ]

  12. identicon
    Lucretious, Aug 12th, 2008 @ 11:16am

    jesus mike, and I thought some of my opinions were simplistic......

    No offense but this sounds like a solution some blue collar schmo spouts off in the barroom after a few beers.

    reply to this | link to this | view in thread ]

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