Avoiding spam with common sense
It couldn't have happened to a nicer guy. Alan Ralsky, the self-proclaimed "godfather of spam", was just sentenced to four years in jail for his part in a 'pump and dump' spam scam. Ralsky, 64, worked in unison with his son-in-law Scott Bradley, and a collection of other people, to defraud people of their hard earned savings by tempting them with fake stock tips.
Here is how pump and dump works: the criminal finds a stock that isn't traded very much (and is therefore volatile to large price movements from relatively small trade volumes), and about which little information is available.
Because of strict financial reporting regulations, you won't find those kind of stocks on exchanges like the NASDAQ, the NYSE, or Canada's own TSE. Instead, you look at pink sheets -- little-known stocks with obscure origins, often from China. Indeed, Ralsky worked with someone who sourced Chinese companies for pink sheet pump and dump scams.
When you have your pink sheet stock, you buy it. Lots of it. Then, you send out a spam email to as many people as you can find, telling them that the stock is a hot tip, because something big is going to happen to the company in the next few days that will send the share price rocketing.
People buy the stock, convinced that the tip is valid. This causes the stock to rise, making the spam a self fulfilling prophecy. When it gets high enough, the scammer who sent a spam mail in the first place sells off his stock, making a nice fat profit, and leaving the victims who fell for the scam out of pocket when the value starts to crash.
When you think about it, this is actually a fiendishly clever idea. It's just bereft of morals, that's all. Ralsky and his cohorts were caught after a three-year investigation involving the FBI and several other organisations.
Why does it work? It works because even the best spam filters let junk mail through sometimes, and because people are naive. Even in 2009, there are enough people willing to invest their life savings on the back of an email sent to them by a perfect stranger about a company that they've never heard of. This is the real problem with crime on the Internet. We need to educate people that folks like Ralsky are on the prowl. But, more fundamentally, we have to explain to them that what looks like a deal that is too good to be true, probably is. Until we eradicate that level of naivete from me Internet, there will be hundreds more Ralskys to replace the one that was just sent down.
Danny Bradbury, MSN Tech and Gadgets
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