Stock scam spam: Going up

The volume of stock scam spam has risen, posing a new threat to investors, warns a new study from network security firm Sophos.

Though traditional spam categories - medication, mortgage and pornography - continue to dominate, new ones such as stock scams are growing, according to the study, which covered the first six months of 2005.

Medications, including unbranded versions of Viagra, accounted for 40 per cent of all spam traffic, the study said. This was followed by mortgages at 11 per cent and porn at 9.5 per cent. Stock-related spam came in fourth place at 8.5 per cent of the total spam traffic. The volume of "pump-and-dump" stock scam email has increased at an average rate of 10 per cent per month, the company said.

Gregg Mastoras, senior security analyst at Sophos, said in a statement: "The purpose behind the pump-and-dump stock racket is to quickly and cheaply disperse false information about a company's stock, along with information obtained from recent press releases, to potential investors via email.

"Typically targeting microcap companies' stock, once these fraudsters dump their shares, and then stop advertising the stock, the price often falls, and investors ultimately lose their cash."

Sophos said stock campaigns usually run for short periods. Though some of the information given is accurate, the deceptive and unsolicited nature of these emails qualifies them as spam. They generally use word variations such as "st0ck" or "stox" to avoid being stopped by spam filters.

Stock scams, combined with traditional phishing techniques, can result in significant financial loss for victims of these swindles, the security firm said, quoting IDC analysts.

Dinesh C Sharma writes for CNET News.com