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Man cops to botnet-fueled pump-and-dump scheme

Securities fraud in the digital age

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An Arizona computer specialist has admitted taking part in a conspiracy that used large networks of compromised computers to inflate the value of stocks so they could later be sold at a profit.

James Bragg, 41, of Chandler, Arizona, pleaded guilty on Wednesday to conspiracy to commit securities fraud and fraud, prosecutors said. He faces a maximum sentence of five years in prison and a $250,000 fine. It wasn't immediately clear when sentencing is to take place.

According to court documents, Bragg was hired to pump the value of two over-the-counter stocks by blasting the internet with promotional email. He in turn hired people to use botnets to distribute the messages to improve the chances they wouldn't be caught by spam filters. The botnets were also used to compromise online brokerage accounts so they could be used to buy up large blocks of the two stocks. He also falsified the headers of the emails, in violation of various laws outlawing spam.

In December 2007, Bragg sent a Skype message to a Texas man identified only as C.R. who acted as a middleman between stock promotors and the email spammers. It reported that the spam campaign for one of the companies was “runnin hard hitting inbox on gmail, hot, yahoo, fusemail” and “should be hitting others as well.”

Bragg also agreed to trade the manipulated stocks among members of the conspiracy in an attempt to give the impression they were being actively traded on the open market. The scam began as early as November 2007 and continued through February 2009.

Bragg, who spent much of his time in Thailand, pleaded guilty to separate spam offenses in 2009 alongside notorious pump-and-dump spammer Alan Ralsky. ®

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