| It has recently been revealed that a few so-called | | | | 4. Suppose that the hackers use their 60 infiltrated |
| clever individuals scammed quite a few other | | | | accounts to purchase 5000 shares in each of them, |
| individuals in a stock scam operation. It was a high | | | | now at 5 cents a share. The owners of hacked |
| tech operation involving hackers and the people | | | | accounts are not likely to notice this quickly as it's |
| affected by it had apparently no clue of what was | | | | only a $250 transaction and it's unlikely to be flagged |
| going on for quite a while. At least 60 people, | | | | as unusual. |
| probably more, were victimized, their brokerage | | | | 5. Suppose that this sudden coordinated purchase of |
| accounts having been broken into and their funds | | | | 300,000 shares at 5 cents a share pushes their price |
| having been used for trading by the perpetrators. | | | | to 10 cents a share, which is quite likely considering |
| The leader of the group of hackers, a 35 year old | | | | others pumping this stock at this point as well. |
| man, is from India. He was sentenced to two years | | | | 6. Suppose that the hackers sell their original 100,000 |
| in prison by a U.S. judge for starting the whole | | | | shares, purchased at 2 cents each, for 10 cents each. |
| scheme. He pleaded guilty and agreed to pay a | | | | Notice that as a result of this operation, they would |
| restitution and to cooperate. He worked with two | | | | have gotten $10,000 on the initial investment of |
| other perpetrators who have also been indicted in | | | | $2000 minus commissions that are not particularly |
| the overseas conspiracy to defraud U.S. investors. | | | | significant, being probably only a few hundred dollars |
| It is not known how exactly this scam was | | | | that would mostly come from the compromised |
| conducted, but here is one plausible scenario. | | | | accounts, anyway. |
| 1. Suppose that Joe Doe owns an account at | | | | 7. Now, since a lot of shares would have been sold, |
| Ameritrade or at some other online broker. | | | | and there was really no fundamental reason for this |
| 2. Suppose that the hackers get Joe Doe's account | | | | hypothetical penny stock to rise, its price is likely to |
| information along with the same information of 59 | | | | drop back to 2-3 cents a share. |
| other people just like him. | | | | 8. The whole operation can be repeated again until |
| 3. Suppose that the hackers purchase 100,000 shares | | | | the owners of the hacked accounts eventually figure |
| of company ABC at 2 cents a share using their own | | | | out that something wrong is going on here. |
| funds, which would cost them only $2000 plus | | | | But by then they might have lost a grand or two. |
| commission and could likely push the price of the | | | | Eventually though, hackers usually get caught for |
| stock to 4 cents a share and alert many penny | | | | sooner or later, greed leads to the downfall of such |
| stock fortune seekers that there is action in the | | | | operations. Had those hackers stopped after one or |
| stock. They might now join the perpetrators and | | | | two pump and dump schemes like that, they might |
| unwittingly inflate the price of the stock even more, | | | | have escaped the long arm of justice. Perhaps... |
| to, say, 5 cents a share. | | | | Fortunately, this was not the case. |