Welcome to the Spam Economy

The Securities and Exchange Commission said that its actions to freeze proceeds from a suspected high-tech pump-and-dump stock scheme and its suspension of stock trading on 35 companies touted in spam are two unrelated incidents.

Others beg to differ.

Dimitri Alperovitch, principal research scientist at Secure Computing, described such spamming and pump-and-dump schemes as part of the same unified spam economy.

Profits from that economy start at botnets or zombie PCs, which are rented out to spammers. Spam goes out touting the value of a chosen company. Excited victims buy into the scheme and buy up stocks in the touted companies. The spammer within a few days sells the stock, pocketing a tidy profit, leaving victims with stocks that are virtually worthless.

“A lot of these guys we believe are renting botnets from spammers distributing Viagra and other types of spam,” Alperovitch said in an interview with eWEEK. “A lot [of the botnet controllers] may be getting paid in … the stock of the company they’re trying to promote. They can use the increased price of the stocks to sell it off and make their profit that way.”

With the ill-gotten profit, he said, the spammers/pump-and-dumpers then buy stock in another company whose value they will tout, and the cycle begins anew.

Helene T. Glotzer, associate director of the SEC’s Northeast Regional Office, told eWEEK that the SEC has been grappling with how to deal with spam e-mail for some time now. Although the Commission has taken action in the past, she said, this is the first time it’s tried to do so on a widespread basis.

“We thought it would be a good way to get messages out to investors based on that they should never invest based on spam,” she said.

Read the full story on eWeek: Welcome to the Spam Economy