"Inside Tip" Spam - New Spin, Old Scam

Here comes an old scam in a new suit.  Two years ago promoters tried to manipulate investors by “accidentally” leaving messages with hot stock tips on telephone answering machines.  See, Sorry, Wrong Number.  It was a calculated “pump and dump” scheme by a pair of Florida promoters who were attempting to manipulate shares of a half dozen microcap companies.  The people behind that fraud now face criminal and civil charges.  See, Phony Phone Message Scammers Busted.

A transparent new scheme surfaced this week, using the same operating principal - “accidental” stock tips.  This time the scammers are using spam e-mail to reach potential investors.  The e-mails – we have received almost two dozen already – are identical, except for the fact that each is addressed to a different “intended recipient.”  This time, the phony tipster claims to have “inside information” about a Canadian company called Capital Reserve Canada Ltd, which trades on the OTC Bulletin Board and Pink Sheets. 

Here is an example:

Hello _____,

I hope this is your email. I received some inside information from Garry Lompard (General Instruments INC). Buy CRSVF.

CRSVF is going to explode. Don't tell anybody about this opportunity.

Alert: Tuesday, September 19, 2006

________________________________

Company: CAPITAL RES CANADA LTD

Ticker: CRSVF

Current Price: $0.25

Target Price: $2.42

Recommendation: STRONG-BUY

Buy: "STRONG"

Expectations: Max

________________________________

When this Stock moves - WATCH OUT! This is your chance to get in the low.  Out CRSVF on your radar's now and reap the benefits early.

John, you can also look the latest news for CRSVF. Don't invest more then 100000$ at once. Better invest 10000$ each trading day. After first day you will see a significant increasement of the stock price and volume. Don't waste that opportunity. Make a right decision now. I can spell the stock symbol for you. C R S V F. Waiting for your response

Sincerely,

Bob Gillahan

Assuming for the moment that this was a real tip – admittedly something of a stretch - it would be improper and unlawful.  Trading on inside information is a fundamental violation of securities law – both for the person giving the tip and anyone who acts on it. 

In this case it would seem far more likely that the “inside information” is a ruse and that “Gary Lompard,” if he exists at all, is not the source of the bogus tip.  Likewise we would bet that “Bob Gillahan” is nothing more than a poison pen name.

There is nothing to suggest that the Capital Reserve Canada was aware of the spam e-mails – although, so far, the Company has not distanced itself from the scheme.  Capital Reserve Canada, based in Edmonton, Alberta, Canada, describes itself as an oil and gas services company.  The Company’s wholly-owned subsidiary, KCP Innovative Services, Inc., provides tools for use in the oil and gas industry.  The Company’s principal shareholders include its directors and two Belize companies.

Is there a scheme underway here?  Consider this.  On September 8, 2006, 400 shares of Capital Reserve Canada were traded, and the stock closed at 18 cents a share (down from the previous day’s close of 25 cents).  On September13^th, the next day trades were reported, 206,000 shares changed hands as the stock price rose to 23 cents.  Then, on September 15^th, 1,022,022 shares were traded, and shares reached a high of 35 cents. 

Investors would be wise not to expect the “increasement” promised by their new buddy, “Bob Gillahan.”