Warnings over new 'pump and dump' scam

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Experts have warned about a new scam encouraging users to buy stock in a cosmetics company in order to inflate its stock market price.

The spam emails, which use an embedded graphic to avoid detection by anti-spam filters, told recipients that investors would be wise to buy stock in the Southern Cosmetics company because of business deals it was making with Naomi LLC. Naomi LLC is a cosmetics firm endorsed by country music singer and infomercial veteran Naomi Judd.

Since this spam campaign was launched, an examination of Southern Cosmetics' share price shows that there has been a marked increase in trading the stock and the share price rose to a high of 6.6 cents from its pre-spam campaign low of less than 1 cent per share.

Experts said criminals use such scams to make money from stock market movements.

"Spammers spread short term 'investment advice' in the hope of pumping a stock enough to offload their own shares at a profit. The increasing quantity and sophistication of pump-and-dump campaigns suggests that there is plenty of money to be made," said Graham Cluley, senior technology consultant for Sophos. "Of course, legitimate investors are left to bear the after-effects of any eventual stock dump."

Cluley said that pump-and-dump stock campaigns account for approximately 15 percent of all spam.

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