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Fake news fraud powers Pairgain stock

Quelle surprise -- it happens all the time, claim analysts

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As hoaxes go, the stunt that created a run on the stock price for California-based telecoms company Pairgain Technologies is hardly anything to get worked up about. The only surprise is that such a sting, which was only mildy sophisticated by all accounts, received so much attention in the first place since this kind of thing happens all the time. Already dubbed "the most cunning Internet investing scam yet", the hoaxer went to the trouble of mocking up a Bloomberg news story alleging that Pairgain had agreed to be bought by Israel-based ECI Telecom. The fake news story was posted on a Yahoo! message board but was quickly pulled off when the scam was rumbled shortly after trading opened in New York. Unfortunately, the damage had already been done by then. Despite denials by the companies in question, PairGain's stock price rose from $8.50 to $11 before closing at $9.375. Anyone who traipses around the electronic gossip shops that litter the Net should know the Web is built on a lies and untruths. The US Securities and Exchange Commission, which is investigating this latest hoax, recently nabbed Charles O Huttoe and 12 other defendants who secretly distributed to friends and family nearly 42 million shares of a company called Systems of Excellence Inc. Huttoe then artificially drove up the share price of the company using false press releases claiming it had won non-existent multi-million dollar sales. He also announced non-existent acquisitions and revenue projections that had no basis in reality. The SEC fined Huttoe $12.5 million but he'd already spent most of his cut by the time the SEC caught up with him and he is now doing bird for his crimes. According to one analyst, this type of fraud is known as "ramping" and it's as old as the hills. "Ramping has been going on for centuries, the Internet has just made it easier," said Benjamin Ensor, a business analyst at Fletcher Research. "My advice to investors is to take every piece of information with a hefty piece of salt." Let's just hope this sound hint isn't misinterpreted by some novice investor and lead to a mass buying frenzy of salt companies and condiment manufacturers. ®

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