Illegal Spamming and Stock Fraud

Eleven people were indicted on a 41 count indictment for illegal use of bulk commercial e-mailing or “spamming.” The scam stretched the residency from the United States to Russia, Canada and Hong Kong.

Spamming has become a global criminal enterprise that involves much more than just burdening and clogging e-mails. This particular scheme was an international attempt to manipulate stock prices through e-mail promotions. The charge arose after a three-year investigation lead by the Computer Crime and Intellectual Property Section of the Department of Justice. The scheme was classified as a “pump and dump” where defendants promoted weak Chinese penny stocks thereby driving up the price and then selling their shares at the inflated price causing others to lose their money.

How did they do it? They used false headers on the emails tricking recipients to click through falsely registered domains with proxy computers to relay the spam. The advertisements made misrepresentations on the email messages to evade spam mailboxes.

The indictment also alleges that the defendants sent their spam with a cybercrime tool called a “botnet” which is a network of robot computers infected with malicious or viral software that is set to detonate and spread at certain times after the spam hits other computers. Investigators estimated that the defendants earned about $3M during the summer of 2005 by using the Hong Kong defendant as a hub for the Chinese companies who were trying to inflate their stock.