Image: Spam text message
For a few days in late August, wireless customers across the country received an unsolicited bulk text message on their cell phones and pagers pitching the penny stock of a Nevada company.
By Herb Weisbaum ConsumerMan contributor
updated 9/5/2007 7:21:59 PM ET 2007-09-05T23:21:59

It seems like everyone with a wireless device is communicating via text messaging these days.

Unfortunately, this includes spammers.

For a few days in late August, wireless customers across the country received an unsolicited bulk text message on their cell phones and pagers pitching the penny stock of a Nevada company.

For many wireless customers, this was their first experience with text message spam.

The message read:

This one is put on Radar
Fredericks Entertainment, Inc.
See all the volume, GET IN
It’ll be $2 within a week

“It’s annoying because I have to pay for it,” said Erik Englund of Seattle, who doesn’t have a text message plan. Until last week, he thought cell phones were spam-free. Not anymore.

Another victim of the spam, Bill Rice, was so upset that he went to a Verizon store, canceled his text message service and blocked all incoming text messages. Verizon is one of the few major wireless companies that let you do that.

"I was just appalled and very annoyed,” Rice, of Seattle, said.

Verizon Wireless claims to block up to 50,000 spam text messages per day. “One spam message is too many as far as we’re concerned,” said Georgia Taylor, Verizon Wireless representative. “We take great lengths in the way of filters and technology to actually block most of these.”

How did the spammers get the numbers of the wireless devices attacked? Taylor says it was random dialing.

How many of the spam messages promoting Fredericks Entertainment were delivered? If the wireless companies know, they won’t say. I can tell you Verizon, Sprint, AT&T and U.S Cellular customers across the country got them.

Sprint representative Caroline Semerdjian said there were two simultaneous spam attacks that overloaded the company’s spam filters and allowed many of the junk messages to get through.

“These guys are constantly trying and testing the water to find a way to get around the filters,” says Howard Schmidt of R&H Consulting in Seattle.

Schmidt, a former White House cyber security consultant, is concerned about the whole issue of attacks on wireless devices. “As we’ve become more hardened in the desktops and the servers, the next logical place for those with criminal intent to go to is the mobile world,” he says.

What were spammers up to?
Last month’s text message blitz was just the latest twist on the traditional pump-and-dump stock scheme. Here is how it works: Scammers buy a penny stock and send out spam to pump up the price. Once the price jumps, the scammers dump it for a quick profit. Everyone who comes to the party late gets clobbered as the stock plummets.

We tracked the FDKE stock. On Aug. 24, it was selling for 10 cents a share. Then the wave of spam hit and the price skyrocketed. By Aug. 28, FDKE hit a high of 15 cents a share — a 50 percent increase. On Aug. 31, it dropped like a rock, down to a low of 7 cents a share.

I called Fredericks Entertainment to see what they know about all this. A secretary, who told me her name was Tania, answered the phone and told me, “No one here knows anything about it.” She said there was no one else there who could talk to me.

What should you do?
If you have a bundled plan, these messages didn't cost you anything, they just reduced the number of messages you can receive this month. If you pay per text message, it did cost you.

In either case, you can contact the customer service department at your cell phone company to get a refund or credit. If they won’t give you one, I would like to hear from you.

Stock spam is now a huge problem
The Internet security firm Sophos estimates that in 2005 less than 1 percent of spam involved pump-and-dump stock schemes. Today, it is about 25 percent.

According to the U.S. Security and Exchange Commission, there are 5.2 billion bogus stock alert e-mail messages sent each year. The spam come via e-mail, instant messaging and now text messages.

On Aug. 8, Sophos reported a massive pump-and-dump scheme. A half-billion e-mails were sent, touting the stock of Prime Time Group Inc. in Branson, Mo.

Part of the message, which came in a PDF file, read:

Hurry, we see this stock starting
to make the turn NOW.
Big watch in effect for August 8, 2007!!!!

This one spam attack, Sophos claims, created a 30 percent jump in global spam traffic over a 24-hour period.

The SEC has targeted this kind of market manipulation through its “Operation Spamalot.” On March 8, the commission suspended trading in the securities of 35 companies that were promoted via spam campaigns. This was the largest trading suspension in SEC history.

While some people may be fooled into buying a stock based on these spam alerts, I think it is fair to say many know exactly what they are doing. They are hoping to cash in on the action without risking a lot of money. The cyber scammers are counting on that.

“That small amount of money, generated by hundreds of thousands of people, means an awful lot to the guys reaping the benefits of the scam,” says security consultant Schmidt.

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