Giant 'pump-and-dump' spam scam hits computers

Spammers have unleashed one of the biggest online stock manipulation campaigns in history in the last 24 hours, increasing global spam levels by 30 percent, a leading IT security company claimed Wednesday.

Experts at SophosLabs have detected about 500 million emails containing advice to invest in Prime Time Stores Inc. -- an obscure US-listed group -- in a record-breaking example of the "pump-and-dump" spamming technique.

"Pump-and-dump" is when spammers buy shares, orchestrate a spam campaign promoting the company, then wait for a share price to rise before selling their stock for a profit.

"This particular campaign was first detected 24 hours ago in Germany and has caused a 30-percent rise in spam worldwide compared to typical levels," said Graham Cluley, senior technology consultant for Britain-based Sophos.

"This is staggering. It's one of the biggest spam campaigns we've ever seen," he told AFP in a telephone interview.

The email cites a company press release announcing the opening of shops by Prime Time Stores in Puerto Rico and goes on to say: "Imagine if you had the chance to buy a Wal-Mart franchise in Mexico right when it first opened its doors there and all you needed was a small stake to get in."

It adds: "Hurry, we see this stock starting to make the turn NOW. Big watch in effect for August 8, 2007!".

Prime Time Stores, which is the exclusive licensee for 7-Eleven convenience stores in Puerto Rico and the Caribbean, did not return calls when contacted by AFP.

The diversified company also has oil and gas, automotive, and mobile phone activities, according to its website.

The stock rose 2.35 percent in morning trade in the United States on Wednesday to 0.087 dollars, but gained 30 percent on Monday and 14.8 percent on Tuesday in the days running up to the detection of the campaign.

"It turns out that it's one of the kinds of spam that actually works," said John Levine, chair of US-based Anti-Spam Research Group.

"There are at least two academic studies that show that the share does go up and the bad guys make money."

Sophos estimates that "pump-and-dump" stock campaigns account for about 25 percent of all spam nowadays, up from less than 1.0 percent in January 2005.

Levine, who is also the author of hit book "Internet for Dummies," says the perpetrators are extremely difficult to catch despite efforts by stock market regulators and police.

"Spamming used to be about guys selling fake viagra from their basements," he said. "Now it's likely to be international crime gangs."

Cluley from Sophos said the share-ramping scams target small stocks, often worth a fraction of a cent, which require only a small increase to deliver big gains.

"They send out fake news about a tiny stock and there are so many day-traders out there that are ready to jump on the bandwagon," he said, referring to amateur investors who play the stock market from home.

The emails promoting Prime Time Stores stock, which are being propagated by thousands of virus-infected home computers whose owners are unaware, has a PDF attachment that contains the investment advice.

The use of a PDF file, a special document-friendly format, makes it easier for the email to slip through spam filters, Cluley said.

Levine has clear advice for anyone tempted to act on unsolicited investment advice sent via email.

"No stranger would ever give you a stock tip for your own good. It was true in the 1920s and it's just as true now," he said.
--AFP