DOJ charges 11 in pump and dump stock spamming operation

The Department of Justice has just announced the arrests of 11 spammers involved in a pump and dump stock spam scheme.

Pump and dump schemes victimize people -- lured by the expectation of too good to be true money -- who buy the stocks at artificially inflated prices. They normally lose money when the value suddenly drops because the people behind the scheme sell off their artificially inflated shares.

One of those arrested, an Alan Ralsky is considered one of the biggest spammers around by Spamhaus, which is an organization dedicated to tracking spam.

From the press release:

A federal grand jury indictment was unsealed today in Detroit charging 11 persons, including Alan M. Ralsky, his son-in-law Scott K. Bradley, and Judy M. Devenow, of Michigan, and eight others, including a dual national of Canada and Hong Kong and individuals from Russia, California, and Arizona, in a wide-ranging international fraud scheme involving the illegal use of bulk commercial e-mailing, or "spamming."

This investigation was conducted over a three year period conducted by the FBI, Postal Inspectors and the Internal Revenue Service. The people involved used all the standard spam diversions including falsified domains and e-mail headers, social engineering lures and good old false advertising.

The release also states that they (tried?) to use botnets to send the spam:

The indictment also alleges that the defendants tried to send their spam by utilizing a cybercrime tool known as a “botnet,” which is a network of “robot” computers that have been infected with malicious software code that in turn would instruct the infected computers to send spam. The indictment charges that the defendants earned profits when recipients responded to the spam and purchased the touted products and services. Hui’s primary role in the scheme was to act as a conduit for Chinese companies who wanted their stocks pumped by the scheme. Ultimately, investigators estimate that the defendants earned approximately $3 million during the summer of 2005 alone as a result of their illegal spamming activities.

Recently, the FBI arrested a lot of Internet misfits in what they termed Operation Bot Roast and Operation Bot Roast II.

Botnets have become a major vehicle in which spam is circulated using zombie computers taken over using spam e-mail containing malicious software. Because the owner of the computer normally isn't aware their computer has been turned into a "spam spewing zombie," it also confuses investigative efforts to track the spam to it's source.

It should also be noted that here again, we see another "Chinese connection" in cybercrime. It's pretty interesting that publically held Chinese companies were working with these spammers to have the price of their stock artifically inflated.

Russian nationals were also arrested in this recent case. Eastern European types seem to be heavily involved in the world of cybercrime.

Here are a list of the laws the government is using to bring the spammers to justice:

The 41-count indictment covers three distinct, but interrelated, conspiracies to capture this evolution in their business practices. The indictment charges the defendants with the commission of several federal criminal offenses, including conspiracy, fraud in connection with electronic mail (CAN SPAM), computer fraud, mail fraud, wire fraud, and money laundering. It also charges the defendants with criminal asset forfeiture, as well as charging one defendant with making false statements to law enforcement.

Sadly enough, spammers have been bold enough to spoof all three investigative agencies involved in this case in the recent past. These spamming incidents normally are what are known as phishing attempts, where the intent of the spammer is to steal personal and financial information using social engineering techniques or malicious software.

The FTC released a report on spam a few days ago. One of the findings was that the people behind this activity are best addressed by agencies that have go after criminal activity.

This action and Operation Bot Roast indicate that these actions are already underway.

On the DOJ site right below the header on this press release is a warning about the DOJ itself being impersonated (spoofed).

A lot of people view spam as an annoying phenomenon in their inbox. If you really examine it, spam is the vehicle for just about every annoying and illegal activity on the Internet.

The full press release, including all the names of the spammers being charged can be seen, here.