The weekly newsletter for Fed2 by ibgames

EARTHDATE: August 27, 2006

Official News - page 9

REAL LIFE NEWS: HOW SPAMMERS MANIPULATE THE STOCK MARKETS

Would you buy stocks and shares based on an emailed suggestion from somebody you had never heard of? Apparently, many people do, and as a result spammers can make a large amount of money from this manipulation of the stock market.

The spammers use a scam called "pump and dump". They pick a penny share with a low price, and buy into it; then they send out emails promoting the shares in the hope that enough people will take the advice to make the price will rise. Once the price does go up, they sell their shares, making a profit - and making the price go down again, so that those fooled by the scam lose out. Some people who respond to the emails can lose 8% of their investment in just two days; the spammers typically see a return of between 4.9% and 6% when they sell. No wonder these emails keep on coming!

These figures come from a recent study of pump and dump scams, published on the Social Science Research Network. The study analysed more than 75,000 unsolicited emails. The results show that approximately 730 million spam emails are sent every week, 15% of which tout stocks - although other estimates of spam volumes are even higher.

The researchers identified emails touting stocks and shares sent between January 2004 and July 2005, and were able to estimate the size of an email campaign. They then compared share prices and trading activity for a stock immediately before and after a campaign. The team found that a spammer who bought shares the day before starting an email campaign, and then sold them the day after, could make a return on his or her investment of 4.9%.

No wonder its impossible to stamp out the spammers - their business really does make them money!


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