22 March 2018

SEC charges two for penny stock spam scam

10 July 2007  |  6054 views  |  0 Statue of Liberty

The US Securities and Exchange Commission (SEC) has filed fraud charges against two Texan men who allegedly hijacked personal computers to launch penny stock e-mail scams that conned investors out of more than $4.6 million.

In a statement, the SEC claims that Darrel Uselton and his uncle, Jack Uselton, both from Texas, llegally profited during a 20 month "scalping" scam which involved the use of botnets that used hi-jacked PCs to forward spam e-mails touting 13 penny stock companies.

Recipients that fell for the scam drove up share prices and the men then sold off their own holdings. The SEC alleges that between May 2005 and December 2006, the Useltons obtained more than $4.6 million through the fraudulent scheme.

The SEC says the men were caught out when one of its own enforcement staff received one of the spam e-mails at work.

Along with the SEC, the Attorney General's Office for Texas and the Harris County District Attorney's Office have filed charges against the Useltons for engaging in organised criminal activity and money laundering. The Texas criminal authorities have also seized more than $4.2 million from bank accounts associated with the Useltons.

Commenting on the case, SEC chairman Christopher Cox, says: "The use of bots to spread investment spam at exponentially higher rates is making this type of fraud an even more virulent threat to ordinary investors. Not only are victims getting hit with get-rich-quick spam, but by turning the victims' computers into zombies, these fraudsters are sending out still more spam to others."

"Given estimates that up to one-quarter of all personal computers connected to the Internet are part of a botnet, and the thriving market in selling lists of compromised computers to hackers and spammers, the SEC is taking this very seriously," adds Cox.

US authorities have stepped up the fight against the hackers this year and in March prosecutors filed federal charges against three Indian nationals who allegedly hijacked online brokerage accounts in the US in order to conduct pump and dump scams.

Earlier the SEC obtained emergency court orders freezing funds contained in accounts held by a Latvia-based bank and an Estonian-based corporation that had allegedly been involved in market manipulation schemes. The regulator also suspended trading in 35 over-the-counter penny stocks that have been the subject of repeated spam e-mail campaigns.

Cox says the commission's anti-spam initiative "is intended to protect investors from fraud artists who would treat the investing public as their personal ATM machines".

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