In today’s economy, who couldn’t use a tip on a hot stock? Be warned: When the tip comes unsolicited in your e-mail inbox, it’s probably a scam.

One of the most common forms of spam these days is the “pump-and-dump” scam. According to the United States Security and Exchange Commission (SEC), spammers send 100 million of these e-mail messages per week!

See examples of stock spam at the SEC Web site.

How pump-and-dump scams work

Spammers buy stock in a small company, often with stock prices of only a few
dollars per share. Then they send out millions of e-mail or text
messages across the globe to encourage recipients to buy that stock.
These messages can even be disguised as confidential information that
was sent to the recipient by mistake.

When enough people buy the stock, the price of the stock goes up. When the
price is high enough the spammers sell their shares. The price goes
back down, and people who purchased the stock as a result of the tip
suffer.

It can be difficult to find out who’s behind pump-and-dump e-mail scams.
That’s because spammers can take control of large numbers of computers
and turn them into zombies that can work together as powerful “botnets”
to send them out.


What you can do to avoid pump-and-dump scams

·          Use spam filtering technology.

·          Don’t make investment decisions based on anonymous e-mail or text messages you receive.

·          Don’t
open attachments in unsolicited e-mails. Stock spam usually comes as an
image or as a PDF attachment, which are common tactics spammers use to
avoid being caught by a spam filters.

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