The trading suspensions, part of an SEC effort code-named “Operation Spamalot, the most ever aimed at spammed companies, were ordered because of questions about the adequacy and accuracy of information about the companies, according to the SEC. The SEC estimates that 100 million such e-mail messages are sent every week, triggering spikes in share prices and trading volume. Investors lose their money when the spam campaign stops, according to the SEC.
“When spam clogs our mailboxes, it’s annoying. When it rips off investors, it’s illegal and destructive,” SEC Chairman Christopher Cox said in a statement .
Linda Chatman Thomsen, Director of the SEC’s Enforcement Division, said, “Many of these companies are no doubt familiar to anyone who reads their email, because each has been the subject of a spam email campaign. While the Commission cautions investors not to make investment decisions based on anonymous emails they receive, we are also committed to tracking down those who prey on investors with false or misleading information.”
Mark K. Schonfeld, Director of the Commission’s Northeast Regional Office, said, “By halting trading in these stocks we are seeking to protect investors from further harm. But this is only the first step. Our investigation of the perpetrators – the people behind this misconduct – is continuing.”
You may be ignoring (or trying to ignore) these messages, but the SEC cited several examples as to how the spam campaigns can affect stock prices and trading volume:
On Friday, December 15, 2006, shares in Apparel Manufacturing Associates, Inc. (APPM) closed at $.06, with a trading volume of 3,500 shares. After a weekend spam campaign distributed emails proclaiming, "Huge news expected out on APPM, get in before the wire, We're taking it all the way to $1.00," trading volume on Monday, Dec. 18, 2006, hit 484,568 shares with the price spiking to over 19 cents a share. Two days later the price climbed to $.45. By Dec. 27, 2006, the price was back down to $.10 on trading volume of 65,350 shares.
On December 19, 2006, trading in Goldmark Industries, Inc. (GDKI), closed at $.17 on trading volume of 126,286 shares. The next day the spam campaign started, with e-mail proclaiming "GDKI IS MAKING EVERYONE BANK!," and setting a 5-day price target of $2. By December 28, 2006, spam emails boasted of the price spike that had already been achieved -- "$.28 (Up 152% in 2 days!!!)" -- and promised a 5-day price target of $1. That same day, GDKI closed at $.35 on a volume of more than 5 million shares. By January 9, 2007, the closing share price was back down to $.15.
A spam campaign in Healtheuniverse, Inc. (HLUN) stock began on September 4, 2006, with emails incorporating a Healtheuniverse press release proclaiming that HLUN was "focused on being the first to commercialize stem cell applications in the $15 billion worldwide plastic surgery and cosmetic surgery market." On September 7, 2006, HLUN closed at $.12 per share on trading volume of 3,000 shares. The spam campaign accelerated, and HLUN shares spiked to $.22 per share on Sept. 11, 2006, with over 2.2 million shares trading hands. By September 22, 2006, the closing price had dropped back down to $.11.
The 35 suspensions concern companies that are not subject to the reporting requirements of the Securities Exchange Act of 1934. Not listed on any exchange, or on the OTC Bulletin Board, the companies' securities have been quoted on the Pink Sheets quotation service on an unsolicited basis, meaning that the brokers posting quotations for the purchase and sale of the securities are not required to conduct due diligence regarding the issuers.
The 35 companies whose trading was suspended (for 10 business days, through noon on March 21, 2007) are:
- Advanced Powerline Technologies Inc. (APWL),
- America Asia Petroleum Corp. (AAPM),
- Amerossi Int'l Group, Inc. (AMSN),
- Apparel Manufacturing Associates, Inc. (APPM),
- Asgard Holdings Inc. (AGHG),
- Biogenerics Ltd. (BIGN),
- China Gold Corp. (CGDC),
- CTR Investments & Consulting, Inc. (CIVX),
- DC Brands International, Inc. (DCBI),
- Equal Trading, Inc. (EQTD),
- Equitable Mining Corp. (EQBM),
- Espion International, Inc. (EPLJ),
- Goldmark Industries, Inc. (GDKI),
- GroFeed Inc. (GFDI),
- Healtheuniverse, Inc. (HLUN),
- Interlink Global Corp. (ILKG),
- Investigative Services Agencies, Inc. (IVAY),
- iPackets International, Inc. (IPKL),
- Koko Petroleum Inc. (KKPT),
- Leatt Corporation (LEAT),
- LOM Logistics, Inc. (LOMJ),
- Modern Energy Corp. (MODR),
- National Healthcare Logistics, Inc. (NHLG),
- Presidents Financial Corp. (PZFC),
- Red Truck Entertainment Inc. (RTRK),
- Relay Capital Corp. (RLYC),
- Rodedawg International Industries, Inc. (RWGI),
- Rouchon Industries, Inc. (RCHN),
- Software Effective Solutions Corp. (SFWJ),
- Solucorp Industries Ltd. (SLUP),
- Sports-stuff.com Inc. (SSUF),
- UBA Technology, Inc. (UBTG),
- Wataire Industries Inc. (WTAF),
- WayPoint Biomedical Holdings, Inc. (WYPH), and
- Wineco Productions Inc. (WNCP).