SEC sues over stock market spam scam
A US couple have been charged over an allegation they made $1m via a stock market pump-and-dump scam, promoted using spam emails.
Jeffrey Stone, 42, of Greenwich, Connecticut, and his missus Janette Diller Stone face a civil lawsuit from the Securities and Exchange Commission (SEC) over their alleged use of junk mail tactics to artificially increase the value of stock they held in start-up firm WebSky Inc.
The pair allegedly bought 288m WebSky shares in September 2004 through various front organisations they controlled before selling them weeks later for a profit of $1m.
The SEC alleges spam emails sent by stock promoters on behalf of the Stones falsely stated that WebSky's business in Argentina was bringing in revenues of $40m. In reality, the start-up had little or no revenue from Argentina or anywhere else at the time the spam emails began circulating.
The junk email campaign helped ramp up WebSky's share value by around 300 per cent, according to the SEC.
The dishonest promotion of WebSky shares is an example of so-called pump-and-dump stock campaigns which net security firm Sophos estimates currently account for approximately 15 per cent of all junk mail.
WebSky itself had no involvement in the attempt to dishonestly promote its stock market price through spreading false rumours. But its chief exec, Douglas Haffner, was charged with selling stock to the Stones in a subsequent deal without registering the sale or obtaining an exemption from registration.
In settlement against these charges, Haffner and WebSky have agreed to surrender $35,000 made from the transaction and to abide by an injunction against further violations of the registration provisions of federal securities law. Haffer has also agreed to pay a $25,000 fine as a part of a proposed settlement, which is subject to court approval, in which neither WebSky or Haffer make any admission of wrongdoing. ®
Sponsored: CISO Guide: Secure Cloud and Mobile Data