Unusual 'pump-and-dump' spam run continues

Computerworld - More spam made its way to in-boxes today touting a small Florida company first hit by a massive "pump-and-dump" scam last week. The company has denied any responsibility for the junk mail that drove up its stock price and said it will look at stockholder data in the hope that it can uncover who was behind the scheme.

Prime Time Group Inc., a Ft. Lauderdale, Fla.-based company that owns and operates convenience and wireless stores in the U.S. and Caribbean, was the focus of a huge spam dump early last week that broke single-day records at several mail-filtering vendors. Like other pump-and-dump scams, the Prime Time campaign involved fraudsters who had earlier bought shares, then used spam to get others to buy in and drive up the price. When enough did, the scammers took their profits and ran. Investors who believed the bogus e-mails were left holding the bag.

Sophos PLC first noticed the Prime Time run around 11:40 a.m. EDT on Aug. 8. By the next morning, it had stopped more than half a billion messages at its traps alone, said Ron O'Brien, a Sophos senior security analyst.

The spam blast did drive up Prime Time's share price from Monday's low of around 7 cents to Wednesday's high of 11 cents, a 57% jump. Thursday morning, however, the bottom dropped out, and the stock fell to under 7 cents. Trading volumes peaked Wednesday as well, at around 1.7 million shares, substantially higher than any day in the month prior.

"You can actually see the wave of activity in the stock and compare it with the volume of spam that we trapped," said O'Brien.

Last Wednesday afternoon, Prime Time announced that it was ordering a Non Objecting Beneficial Owners (NOBO) list to get a clearer picture of who owned its shares. "The NOBO list will be used to determine the naked short positions in Prime Time Group Inc.," the company said in a statement. "The finding will then be reported to the [National Association of Securities Dealers] to take action against the violators of the naked short regulations."

"Naked short" is a investment term that refers to selling short, essentially a bet that the price will drop, but with a twist: "naked" means that the investor sells short without first making sure he can borrow the shares from another investor holding a "long" position on the stock.

On Friday, Prime Time rolled out another statement, this one denying any connection with the pump-and-dump scam. "Shareholders should be aware that the company is not the source of any information distributed via bulk e-mail," said Prime Time. "The company releases information to shareholders on a timely basis, and there are currently no undisclosed material announcements, events or facts with regard to the company."