Stock spam leads to trade freeze on 35 firms

The US Securities and Exchange Commission (SEC) has taken action against alleged stock promoters and hackers thought to have broken into trading accounts.

The SEC yesterday suspended trading in the securities of 35 companies that were heavily promoted in spam email campaigns, it said in a statement. The trading suspensions, the most ever aimed at spammed companies, were ordered because of questions about the adequacy and accuracy of information about the companies, it said.

Earlier in the week it won an emergency court order freezing assets in a Latvian-based bank's trading account that allegedly was used in 'pump-and-dump' manipulation of shares in 15 different companies, the SEC said in a separate statement.

As part of the pump-and-dump scheme, online brokerage accounts at seven companies were breached and used to manipulate the market and boost the price of specific stocks, the SEC said. Through this technique, the unknown hacker-traders generated $732,941 in illicit profits and cost US brokerages some $2m in losses, the SEC said.

The SEC action to freeze the assets is the third filed in as many months involving market manipulation schemes conducted through online account intrusions. In the past, the SEC has also taken action against individuals who allegedly broke into financial news websites or news release services.

The Thursday trading suspensions are part of an SEC effort code-named "Operation Spamalot". The effort seeks to shield investors from the potentially fraudulent spam email campaigns that hype penny stocks. The SEC estimates 100 million such email messages are sent every week, triggering spikes in share prices and trading volume. Investors lose their money when the spam campaign stops, according to the SEC.

SEC chairman Christopher Cox said in a statement: "When spam clogs our mailboxes, it's annoying. When it rips off investors, it's illegal and destructive."

Joris Evers writes for CNET News.com