Off to jail you go!
- Posted by: JP Smith | November 25, 2009
- Filed Under: Internet, Law and Order
You may not know Alan Ralsky but, you may be familiar with his work. He was probably responsible for a good portion of junk emails you received in your inbox over the years.
Ralsky spammed inboxes everywhere from 1997-2007 and, at one point, was sending out 70,000,000 emails a day from bogus email addresses.
However, that wasn't bad enough.
Ralsky, along with nearly a dozen other conspirators, ran a pump-and-dump scheme in which email communications were used to hype up and inflate the price of penny stocks from China. According to the Securities and Exchange Commission, a pump-and-dump scheme works 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 a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have "inside" information about an impending development or to use an "infallible" combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is "pumped" up by the buying frenzy they create. Once these fraudsters "dump" their shares and stop hyping the stock, the price typically falls, and investors lose their money.
In this instance, Ralsky worked with an insider who was heading up a Chinese firm tasked with promoting the stocks. Ralsky and his co-consiprators made millions with this scam.
After a three-year investigation, Ralsky was charged with conspiring to commit wire fraud, committing wire fraud, violating the CAN-SPAM Act and money-laundering. Ralsky was convicted and, due to his cooperation with the investigation, saw his possible 11-year sentence reduced to a max of 3.5 years. Ralsky was also fined $250,000.
Some of his co-consiprators fared about the same. John Brown received a 3-year sentence and agreed to forfeit $120,000.
How Wai John Hui, the head of the Chinese firm promoting the stocks, received a sentence of a little over 4 years and will surrender $500,000 of the proceeds he made in this scheme.
Ralsky is now out the game but, unfortunately, his legacy lives on in all our inboxes.
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