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sec-creates-extortion-scheme-opportunity

Posted by: admin 15 years, 3 months ago

Following up on my recent post about the bizarre action of the SEC of punishing companies that are victims of pump-and-dump spam. Paul Moriarty, director of product development for Internet Content Security at Trend Micro has pointed out that suspending the stocks created a denial of service/extortion opportunity:

"Pretty soon, you'll start seeing extortion schemes. The spammers will simply call up a company and demand money on the threat of a pump-and-dump spam run. Think about it, a spammer now has the power to control which stocks are suspended by the SEC," Moriarty warned.
Of course, one hopes, that if the company can show it is been extorted, the SEC will realize the errors of its ways.

The SEC has actually been able to get some charges filed against pump-and-dumpers. To be clear, these were not spammers, rather they had hijacked brokerage accounts, probably by stealing the username and passwords of the account holders. From the Globe and Mail:

The alleged “hack, pump and dump” scheme has cost one brokerage firm at least $2-million (U.S.) in losses, prosecutors said. An estimated 60 customers and nine U.S. brokerage firms, including Ameritrade, E-Trade and OptionsXpress, were duped in the case during a four-month period last year, according to the Justice Department.
I wonder how long before the SEC starts pushing for stronger authentication technologies like the FFEIC?

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