WASHINGTON,:US stock market regulators suspended trade in 35 small companies Thursday due to a fraudulent campaign of mass e-mails, or “spam,” that hyped the firms’ shares to investors, officials said.
The Securities and Exchange Commission said it had acted, issuing its highest number of suspensions ever related to mass e-mailing known as spamming, to protect unsuspecting investors from likely fraud.
“This morning the Securities and Exchange Commission struck a blow for investors and for every American with a computer against one of the worst menaces of the information age,” SEC chairman Christopher Cox told reporters at a news conference at the regulator’s headquarters.
The suspensions under “Operation Spamalot” are part of an increased bid by the SEC, America’s top market regulator, to aggressively tackle spam e-mail campaigns that tout a company’s stock by falsely claiming a major new oil discovery or a new product launch.
Officials said that even SEC staffers had received the widely distributed e-mails, despite spam-blocking software programs, which they said had netted perpetrations millions of dollars in ill-gotten gains.
Cox said the SEC was vying to bring those behind the e-mails to account and that the agency was working with foreign regulators as such communications often crossed international borders.
Due to technological advances, spammers can be based offshore, in a different country or even on the other side of the world, but can fire off thousands of spam e-mails with the click of a computer key.
The SEC estimates that some 100 million spam messages touting stocks are e-mailed en masse every week, sometimes triggering dramatic spikes in share prices and trading volumes.
The actions aim to protect investors from potentially fraudulent spam e-mails hyping small stocks. The e-mails seek to dupe investors with phrases like, “Ready to Explode,” “Ride the Bull,” and “Fast Money,” according to the SEC statement.
Regulators said unwary investors may trade on such spam e-mails believing a company’s stock is set to spike, but said that they could in fact lose their shirts as such e-mail-based claims are often false.
Some of the 35 small stocks suspended include America Asia Petroleum Corp., Equitable Mining Corp., Koko Petroleum Corp., Biogenerics Ltd., National Healthcare Logistics, Relay Capital Corp., and Sports-stuff.com Inc.
One such spam e-mail sent to AFP Thursday urged investors to buy stock in Cambridge Resources Corp, saying “hot news keeps CBRP on the go!”
It was not clear from the e-mail what the supposed “hot news” was and SEC officials warned investors about the perils of such anonymous messages.
“Never buy stock based on an e-mail from someone you don’t know. We urge investors to do their homework before investing in any company,” SEC enforcement director Linda Thomsen cautioned.
An SEC spokesman said the agency’s probe was ongoing in a bid to uncover who was behind the mass e-mail campaigns.
The trading suspensions will last for 10 days. The companies involved are not listed on any US exchange, but are priced by brokers on the Pink Sheets quotation service.