Securities Fraud is a big problem on the internet these days. You've seen the e-mails that promise big gains in share prices over the next few days. Well, these are connected to scammers. The con game is to buy up some penny stock, then advertise it, and sell once the victims have also bought in and so inflated the price. Once the con artist sells his relatively large holdings, the price plummets again and the victims are left with much less capital than they started with. It's hard to detect at the market-wide level because dramatic price variation is common in penny stocks.

I'd like to see a way to prosecute these offenders for securities fraud, but I suspect that this particular game is perfectly legal. (I am not a lawyer.) In any case, might it be possible to develop a legal doctrine to fight this? Suppose I give out trading advice to the general public. Should I not then be legally required to be a licensed broker? And since I am not so licensed, should there not be some statute imposing penalties, such as requiring me give all my assets to the state?

It's presently illegal to practice law without a license. That has a specific definition: I can quote the law without penalty, but I may not give someone advice on a particular case. Trading is a little different matter. You're responsible for your own money, and if you trade unwisely, it's your fault. However, I still think that it's blatantly unethical to manipulate markets by spreading lies. The scam artist is not qualified to predict the price of a stock, but makes a purposely false representation that he is, and then profits from it. To my way of thinking, that is fraud. Whether the authorities agree, I don't know. At least one person has been charged with a related crime, in which he faked an internal memo about a company's poor financial situation, then sold the stock short and gained as the price dropped. However, I don't know what exactly they got him for. Al Capone was finally caught for tax evasion, after all.

If the authorities agree to define market-spamming as a crime against the state, then what would it take to catch such people or cut off their revenue streams? Do we even need legal intervention, or is there something that internet companies can do? Will a collection of technologies prove effective, or is there a social education movement that might dramatically diminish the potential returns from this scam?