Get rich schemes continue to be a low-cost, low-technology means of earning an illegitimate buck, especially in the cyber world, where millions can be stolen with the click of a mouse. This reality was recently illustrated when a false news story went viral that claimed that small broadband wireless Internet network provider, ICOA (OTN: ICOA), was acquired by industry giant Google (NASDAQ: GOOG).
A hoax press release published on PRWeb.com, a leading online news distribution service, became an unwitting tool for a cyber fraud scam. The release, claiming to be on behalf of ICOA, professed that Google had acquired the firm for roughly $400 million. Major media outlets then quickly picked up the story.
Unbeknownst to either Google or ICOA, the Associated Press and Tech Crunch, a consequential technology news blog, and others ran with the fraudulent news, and shortly thereafter the story went viral.
The truth of the matter is that Google had not purchased ICOA and that the press release was part of a well-choreographed scheme by currently unknown perpetrators.
Naturally, once the news of the acquisition began to make its rounds, a flurry of activity and trades were made by investors and firms seeking to capitalize on the announcement. On an average trading day ICOA has a volume of around 925,000 shares, but shortly after the announcement, on November 26, the company had more than 3.3 billion shares trade hands.
The claimed acquisition amount would have meant that Google was paying a handsome premium – nearly 470 times ICOA’s market value – but that did not raise any red flags or draw immediate skepticism by traders. Zero efforts to verify the authenticity of the announcement through Google or ICOA representatives were made, meaning that the press release was simply taken at face value.
As the news eventually reached Google and ICOA, trading of ICOA’s stock was frozen, and the press release and reports were quickly refuted and denounced as illegitimate.
A compounding social occurrence aided the spread of this fake press release that caused ICOA’s stock to jump in value and volume. Former president of the information sharing and intelligence partnership with the private sector, the FBI InfraGard program and Ra Security System’s current President, Gideon J. Lenkey, explains, “As the article gets published more, it becomes more legitimate looking, a social engineering tactic called social proof. Social proof simply means that most people will make a quick decision about something based on what everyone else is doing.”
Further, Lenkey says, “Once that piece was in place the whole thing just took off as the investors will react as a herd, on social proof, more or less. If you know how the herd will react in advance then you can profit from it, in this case by purchasing the stock and then selling it off as the price rose in reaction to the news.”
While the whole situation is still under investigation, it appears that the motivation for the spoofed and fraudulent press release was to create a short-term surge in the market value of ICOA’s stock. The small value of ICOA’s beginning stock price and the assured increase in its value impending an acquisition by tech-Titan, Google, suggests the operation of a criminal “pump-and-dump” scheme.
A “pump and dump” is usually employed on penny stocks or microcap equities. The process falsely enhances the perceived value of a company’s stock price so that it can be sold to unsuspecting victims at a higher price than the original purchase price. The idea is to manipulate the price by putting out fabricated information claiming strong earnings, a significant partnership agreement, or a pending acquisition was on the horizon.
Lenkey notes that this case, “smacks of international organized criminal activity, the stock trades were probably performed from many different accounts so there would be no obvious ‘smoking gun’ and I imagine the money is now likely in foreign banks.”
“Open source intelligence reports suggest that this is how many criminal organizations are now operating, as teams of highly trained specialists.” Adding, “ICOA could have also been specifically targeted, if that’s the case we’ll see more of this sort of fraud.”
Identifying and prosecuting the individual or individuals who submitted the fake ICOA press release to PRWeb.com is unlikely to occur. Clearly, PRWeb.com will have to review its internal procedures for handling press release submissions as well as more carefully screening the submitting party. Additionally, the members of the media who haphazardly spread the word about the acquisition will likely have to pause and remember to fact check stories.
Ultimately, it is yet another example of how simple techniques of social proofing, social engineering, and a little research to create a convincing narrative, can be used to pull the wool over the eyes of credible people. The Internet remains a bastion of both information and misinformation. Readers need to take what they read with a grain of salt, or at the very least, take the time to trace the origin of the facts to a verified, authenticated source.
And as Gideon Lenkey says, “Protecting yourself from this sort of thing requires constant skepticism,” adding, until that “paradigm changes, Internet based fraud will continue to be a big business because business is good!”
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