Financial Spam On The Rise, According To U.K.-Based Clearswift

by Michael Shields, Apr 16, 2004, 12:00 AM

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Pharmaceutical-related email messages promising too-good-to-be-true physical enhancements account for the largest spam segment at 57 percent, but financial-related spam appears to be on the rise. That's according to Clearswift, an email software company that monitors spam.

Clearswift's latest "Spam Index," report, which provides a monthly overview of the content of spam emails, shows that financial-related spam rose from 10.8 percent to 26 percent, month-over-month, for the period ending March 31. The jump represents the biggest the U.K.-based Clearswift has seen in the eight months since it created the Index. The company attributes the jump to an increasing number of bogus stock tips.

Clearswift analysts theorize that the spammers responsible for such emails may be attempting to drive up the value of specific stocks for their personal gain.

Alyn Hockey, Clearswift's Director of Research, says: "It is hard to believe that spammers can influence stock market prices, but they wouldn't be sending these emails unless there was something in it for them. Perhaps the pickup in the economy is tempting the uneducated investor to have a flutter."

Financial spam often suggests that the sender has "insider" information and attempts to persuade recipients to act quickly on tips or advice.

Financial analysts who spoke to MediaDailyNews confirmed that such mass emails can influence "bulletin board" stocks, or "penny stocks" that trade at lower volume and can show large price spikes quickly.

"It's very possible to create a false market," says Tom Taulli, fund manager at Edgar Online and author of "The Edgar Online Guide to Decoding Financial Statements." Taulli says: "If you have a stock that only trades 100 shares a day, a little buying, and it can be up 200 percent. Sellers can then claim heavy growth, but there is not any real value there."

Taulli could not point to specific Internet stock scandals that arose from instances of financial spam, but says that it's very possible that "one or two guys in a fly-by-night operation can conduct a 'pump and dump' by making a lot of outrageous claims. This sort of thing has been going on for years," he says.

Analysts say that the Securities and Exchange Commission has gotten tougher than ever in enforcing laws against stock scams, in light of the many corporate scandals of the past several years and the federal Can-Spam legislation passed early this year.

Both the SEC and the Nasdaq post extensive warnings and complaint referral systems on their Web sites regarding Internet financial scams, and specifically, the dangers of hoaxes via spam.

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