A man pleaded guilty Oct. 20 to being involved in a plot to inflate stock prices using spam, an army of computer hackers and other methods.
An Arizona man described by
the FBI as a computer specialist pleaded guilty Oct. 20 to participating
in a scheme to artificially inflate stock in a pump and dump scam.
James Bragg of Chandler, Ariz.,
pleaded guilty to a count of conspiracy to commit securities fraud and fraud
in connection with electronic mail
-in this case, spam messages containing
falsified information. According to his plea, Bragg agreed with others to try
to manipulate the price and volume of particular stocks in order to sell them
later at a higher price, a scheme known as "pump and dump."
"Securities fraud committed through computer intrusions is an imminent
and growing threat," said Michael B. Ward, special agent in charge of the
FBI's Newark Field Office, in a statement. "Every time we make an arrest
in a case like this and disrupt or dismantle such schemes, it levels the
playing field for honest investors and restores faith in our markets. I thank
the Securities Exchange Commission and the U.S. Attorney's Office on our
collaborative efforts to confront this threat."
The scheme began as early as November 2007 and continued through February of
2009. According to information filed in federal court in Trenton,
N.J., Bragg was hired by an individual
referred to in information filed in federal court in Trenton
as "C.R." to promote certain stocks. To help with this, Bragg
spammed out e-mails
to promote the stocks and falsified information so that
the e-mails could not be traced to him or C.R. He also altered the contents of
the e-mail to avoid spam filters, authorities said.
From there, Bragg hired hackers and spammers, including an individual in Russia
referred to as "B.T." The cyber-criminals created a botnet, which was
then used to promote the stocks. Some of the targeted victim-investors were
residents of New Jersey,
The hackers also hacked into the brokerage accounts of third parties,
liquidated the stocks in those accounts, and then used those accounts to purchase
shares of the manipulated stocks. Bragg also agreed with C.R. to trade the
manipulated stocks. All this was done to create the impression the stocks were
active, authorities said. In some instances, this was done before spam
campaigns were initiated so that recipients of the spam would perceive active
trading in the promoted stocks.
In addition, a stock promoter who was also part of the conspiracy falsified
documents submitted to attorneys in order to obtain opinion letters to secure
millions of freely trading shares in the stocks. The letters certified that
trading restrictions on shares of the manipulated stocks could be lifted
because certain conditions set forth in securities regulations were met,
"The conspirators may have updated the fraud with technology, but strip
away the army of computers and this is a classic pump and dump scheme,"
said U.S. Attorney Paul Fishman, in a statement. "As criminals
increasingly use new technology to commit crimes, federal law enforcement will
continue to rely on equally sophisticated methods to track and thwart evolving