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SEC suspends trading of 35 companies over spam

The Securities and Exchange Commission (SEC) suspended the trading of 35 companies connected to spam email campaigns as part of what it calls "Operation Spamalot."

The Securities and Exchange Commission (SEC) has suspended the trading of 35 companies it accuses of pushing "recent and repeated spam email campaigns." The commission ordered the trading suspensions because it questioned the accuracy of information about the companies involved.

The SEC said in a statement that the crackdown is part of what it calls "Operation Spamalot" -- an effort to protect investors from potentially fraudulent spam email hyping small company stocks with phrases like, "Ready to Explode," "Ride the Bull," and "Fast Money."

"It's estimated that 100 million of these spam messages are sent every week, triggering dramatic spikes in share price and trading volume before the spamming stops and investors lose their money," SEC Chairman Christopher Cox said in a statement on the organization's Web site. "When spam clogs our mailboxes, it's annoying. When it rips off investors, it's illegal and destructive."

On the Web site, the SEC gave examples of spam campaigns that hurt investors, including these two examples:


  • On Friday, Dec. 15, 2006, the SEC said, shares in Apparel Manufacturing Associates, Inc. closed at $.06, with a trading volume of 3,500 shares. After a weekend spam campaign distributed emails proclaiming, "Huge news expected out on APPM, get in before the wire, We're taking it all the way to $1.00," trading volume the following Monday hit 484,568 shares with the price spiking to over 19 cents a share. Two days later the price climbed to $.45. By Dec. 27, 2006, the price was back down to $.10 on trading volume of 65,350 shares.
  • On Dec. 19, 2006, trading in Goldmark Industries, Inc. closed at $.17 on trading volume of 126,286 shares. A spam campaign started the next day with emails proclaiming "GDKI IS MAKING EVERYONE BANK!," and setting a five-day price target of $2. By Dec. 28, 2006, spam emails boasted of the price spike that had already been achieved -- "$.28 (Up 152% in 2 days!!!)" -- and promised a five-day price target of $1. That same day, GDKI closed at $.35 on a volume of more than 5 million shares. By January 9, 2007, the closing share price was back down to $.15.
  • The trading suspensions will last for 10 business days, the SEC said.

    The SEC said trading of the following companies was suspended: Advanced Powerline Technologies Inc., America Asia Petroleum Corp., Amerossi Int'l Group, Inc., Apparel Manufacturing Associates, Inc., Asgard Holdings Inc., Biogenerics Ltd., China Gold Corp., CTR Investments & Consulting, Inc, DC Brands International, Inc., Equal Trading, Inc., Equitable Mining Corp., Espion International, Inc., Goldmark Industries, Inc., GroFeed Inc., Healtheuniverse, Inc., Interlink Global Corp., Investigative Services Agencies, Inc., iPackets International, Inc., Koko Petroleum Inc., Leatt Corporation, LOM Logistics, Inc., Modern Energy Corp., National Healthcare Logistics, Inc., Presidents Financial Corp., Red Truck Entertainment Inc., Relay Capital Corp., Rodedawg International Industries, Inc., Rouchon Industries, Inc., Software Effective Solutions Corp., Solucorp Industries Ltd., Inc., UBA Technology, Inc., Wataire Industries Inc., WayPoint Biomedical Holdings, Inc., and Wineco Productions Inc.

    Early reaction to the suspensions was positive among security experts.

    "The SEC's ruling is a clear indication of the effect of pump-and-dump scams on the financial community," Ron O'Brien, senior security analyst with UK-based Sophos, said in a statement. "There are already stiff penalties in place for those convicted of these scams such as high fines and jail time, but this ruling will serve as a further deterrent as it aims to prevent the trades before a scammer can profit."

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