Internet Fraud Casebook

Chapter 19. Hack, Pump And Dump

NADIA BRANNON

Anatoliy Serov was intensely staring at his computer monitor. "Yes, there it is; place a sell order now. Sell order complete!" Anatoliy was jubilant, and he immediately called his girlfriend, "Lenchik, be ready by six — we are going to Onegin to celebrate." Onegin was a fashionable, high-end restaurant in St. Petersburg, Russia, and Anatoliy's girlfriend was understandably confused.

"Celebrate what? Tolik, are you crazy? Do you know how expensive Onegin is?" she asked.

"Yes, baby, I know. We are finally rich! I made 30,000 bucks today on the financial market, and this is just the beginning."

Anatoliy could have been mistaken for a successful investor, financial broker or lucky day trader, but in fact he was none of the above. He was a talented computer programmer working for a small development firm in St. Petersburg. And Anatoliy (along with a few of his work colleagues) had just successfully executed a pump and dump scheme with a new, high-tech twist. The Securities and Exchange Commission (SEC) defined these schemes as follows:

"Pump and dump" schemes, also known as "hype and dump manipulation," involve the touting of a company's stock (typically microcap companies) through false and misleading statements to the marketplace. After pumping the stock, fraudsters make huge profits by selling their cheap stock into the market. Pump and dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy ...