In today's economy, who couldn't use a tip on a hot stock? Be warned: When the tip comes unsolicited in your e-mail inbox, it's probably a scam.
One of the most common forms of spam these days is the "pump-and-dump" scam. According to the United States Security and Exchange Commission (SEC), spammers send 100 million of these e-mail messages per week!
See examples of stock spam at the SEC Web site.
How pump-and-dump scams work
Spammers buy stock in a small company, often with stock prices of only a few dollars per share. Then they send out millions of e-mail or text messages across the globe to encourage recipients to buy that stock. These messages can even be disguised as confidential information that was sent to the recipient by mistake.
When enough people buy the stock, the price of the stock goes up. When the price is high enough the spammers sell their shares. The price goes back down, and people who purchased the stock as a result of the tip suffer.
It can be difficult to find out who's behind pump-and-dump e-mail scams. That's because spammers can take control of large numbers of computers and turn them into zombies that can work together as powerful "botnets" to send them out. For more information, see Zombies and botnets: Help keep your computer under control.
What you can do to avoid pump-and-dump scams
· Use spam filtering technology. For more information, see Help keep spam out of your inbox.
· Don't make investment decisions based on anonymous e-mail or text messages you receive.
· Don't open attachments in unsolicited e-mails. Stock spam usually comes as an image or as a PDF attachment, which are common tactics spammers use to avoid being caught by a spam filters.
· Use an ISP or e-mail provider that has implemented Sender ID Framework, a technical solution to detect and block spoofed e-mail. Windows Live Hotmail and Exchange Server 2003/2007 are two of the dozens of solutions that support this technology.