Stocks suspended in spam crackdown

WASHINGTON — The Securities and Exchange Commission on Thursday suspended trading in 35 companies in a crackdown against spam e-mail sent by unknown market manipulators to hype stocks of thinly traded companies.

The SEC said it took the action to protect investors from fraud, because the accuracy of information in e-mails about the “spammed” companies was questionable.

E-mails heralded with messages such as “Ready to Explode,” “Ride the Bull” and “Fast Money” clog people’s inboxes — an estimated 100 million of them a week — and spark dramatic spikes in trading and stock prices before the spamming stops and investors lose their money, the SEC said.

The suspensions are part of an SEC effort called “Operation Spamalot.” They will last for 10 business days, until 11:59 p.m. Eastern time on March 21.

The companies’ shares are not traded on stock exchanges. They are listed on the so-called Pink Sheets, an electronic quotation service in which brokers posting quotations to buy or sell stocks are not required to investigate the background of the companies.

The use of spam e-mail to hype stocks is a variation on the classic “pump and dump” stock scheme, in which the perpetrators get people to buy stocks to inflate their prices and then sell their blocks of shares at a profit. Ordinary investors can suffer heavy losses when the prices tank amid the dumping of stock.

“When spam clogs our mailboxes, it’s annoying. When it rips off investors, it’s illegal and destructive,” SEC Chairman Christopher Cox said at a news conference.

“Today’s trading suspensions, and actions that will follow, should send a clear message to spammers: the SEC will hold you accountable.”

SEC officials said their investigation of the perpetrators behind the spam schemes continues.