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Pump-and-dump stock phishing spam up 400% in 2006

15 January 2007  |  12198 views  |  0 online place bid

Pump and dump penny stock e-mail phishing scams rose by a massive 400% in 2006 according to data from US digital security firm SonicWall.

Last year both US and Canadian regulators warned online investors of the so-called pump-and-dump stock schemes, where criminals use funds from looted brokerage accounts to drive up the prices of little-traded stocks. They then sell shares they had bought earlier at a profit.

In August, the Investment Dealers Association of Canada warned brokerages to be on the alert for suspect account activity after reports of the scam from a number of member firms, while in December the Securities and Exchange Commission (SEC) obtained an emergency asset freeze against Estonia-based Grand Logistic which is accused of conducting a pump and dump scheme.

Pump and dump fraud reportedly cost online broker E*Trade at least $18 million in the third quarter of 2006 alone. TD Ameritrade has also been hit by the scams but specific details of losses have not been disclosed.

Gleb Budman, senior director of e-mail security at SonicWall, says: "Online theft has become more sophisticated, more "stealthy" and more universal: rather than targeting large organisations, scammers are making substantial profits by focusing on individuals."

The SonicWall data also shows a 64% increase in the numbers of definite phishing e-mails. The top ten institutions whose names were spoofed by e-mail spammers were all banks.

Phishing attempts are becoming more ingenious and fraudsters are also sending more spam messages for each attack, says SonicWall.

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