Fergie's Tech Blog

How Lucrative is Pump-and-Dump Spam?

This is an example of some fun we have been having in the office the past few months -- watching Moriarty's "fantasy" pump-and-dump stock investments.

Ryan Naraine writes on the Zero Day Blog:

Are pump-and-dump spammers really making money from hyping penny stocks in e-mails? Paul Moriarty has the answer and it's an eyebrow-raising sight.

Over the last month, Moriarty, director of product development for Internet Content Security at Trend Micro, has been running a virtual portfolio of selling short on stocks found during spam runs. After 22 transactions in a five-week period, he has earned a whopping $25,610.

Short selling (shorting) a stock is the act of profiting from a stock price going down. A short seller will typically borrow a security and sell it, expecting that it will decrease in value so that they can buy it back at a lower price and keep the difference.

During Moriarty's research, he used data from pump-and-dump e-mails flooding into Trend Micro's spam honeypots. "As soon as I see activity on a particular stock, I'll short that and set a limit to cover after I've made 10%. In just over five weeks, I've turned a 25.6 percent profit on a $100,000 virtual portfolio. This is exactly what these spammers are doing. It's risky business but it's easy money," Moriarty said in an interview.

"I made money on every transaction," he added.

posted by Fergie @ 3/09/2007 02:44:00 PM