Who is Lewis Jacobs? And why is he e-mailing me out-of-the-blue investment advice? He has sent me something called a "momentum alert" for an obscure Vancouver-based start-up called AGA Resources, which, according to company press releases has yet to earn any revenues, but has just acquired "a mineral property" in British Columbia and diamond core drilling equipment.

Hmmm, sounds fishy to me. But fear not. According to Mr Jacobs’ e-mail, dated Tuesday, July 25, this over-the-counter-stock is poised for a massive gain. It will rise from $1.83 to $6 in the next seven days, his tip predicts. How is this possible? Mr Jacobs won’t say, other than to give this vague assurance: "Big news expected. This stock will explode! Don’t wait until it’s too late!!!"

And sure enough, Tuesday is one helluva day for the stock. The trading volume shoots up from negligible territory on Monday to roughly 35,000 shares changing hands by midday on Tuesday. In all, the stock climbs about 42 cents, or 23 per cent, on the day. (However, it’s still about 50 cents below where it was trading a week ago. It’s clear this stock is dictated solely by day traders, and, if recent history is any judge, it is poised for another fall in subsequent sessions.)

Whether company executives know it or not, AGA Resources is caught up in one of the fastest growing areas of spam and online fraud: pump-and-dump e-mail scams. According to anti-virus and spam detection specialists at the online security company Sophos, these financial fraud e-mails now account for 15 per cent of all daily spam, up from 0.8 per cent in January last year. Hundreds of millions of bogus stock e-mail tips are pumped out daily to unsuspecting internet users.

"Within the past year, the pump-and-dump spams have become more and more prominent," Graham Cluley, senior technology consultant at Sophos, says. "It’s a real growth area."

The phenomenon is nothing new. During the frothy days of 1999 and 2000, scammers were regularly touting dodgy stocks on investor bulletin boards. The idea was to generate just enough interest in the low volume penny stocks to nudge them higher, and selling off at the peak. A penny or two gain in share price could earn a canny scammer a quick killing. And, because the stocks are so obscure, financial services watchdogs like the Securities and Exchange Commission in the US or Financial Services Authority in the UK were unlikely to catch the culprit until it was too late.

Clearly, spamming stock tips to the web masses is much more effective than cold calls or even bulletin-board notices. As Mr Cluley can attest, the spam e-mails are designed to fool both man and machine. To trick the most rudimentary spam filters (including the one used by Gmail), the stock tips are written on a small graphic that is either embedded in the body of the email or on an attached image. The filters tend to read the message simply as a harmless image and let it breeze through.

The AGA Resources tip I received is written in just such a way – on an embedded image that, when viewed, displays an elegant font type on a light green background. And the grammar, aside from the many exclamation points, is coherent – a far cry from the typical "Impruv yer sex livez w Viagara" messages we drown in daily.

Last month, Sophos decided to follow the stock market performance of one penny stock, called Southern Cosmetics Inc, being promoted by the spammers. As Sophos reported, the shares were hovering around one US cent with minimal volume in the days prior to the spam tip being sent out. On June 21 a barrage of spam touting an imminent share price rise for the firm started to appear in people’s inboxes. Within two days, shares in Southern Cosmetic had jumped from one cent to more than six cents, an increase of more than 500 per cent, before crashing back to earth. As Mr Clulely observed: "This had been a dead stock, but as soon as the spam went out: woomph!"

Despite a series of arrests connected to web-based investment fraud, there’s no clear picture of who is behind the scams. It could be "boiler room" stock market fraudsters plying their trade in a more lucrative domain. It could also be spam and phishing gangs diversifying into new areas. "They could be based anywhere around the world," according to Mr Cluley.

In theory, it may be possible to generate leads by tracking large purchases in the days preceding a stock-touting e-mail barrage and then following who sells off at the top, but it’s unlikely to slow down the scam. In the end, the scam can only be stopped by warning gullible investors to steer clear of unsolicited stock tips that land in your e-mail inbox each morning. And to be careful of any e-mails sent to you by Lewis Jacobs – if that is his real name.

Bernhard Warner is a former Reuters internet correspondent in Europe and senior editor for The Industry Standard Europe. He writes about technology, the internet and media industries and can be reached at techscribe@gmail.com

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained