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Australian Man Jailed Over Stock Spam Incident

30 October 2000

CANBERRA, Australia -- An Australian man has been given a two-year sentence after pleading guilty in the County Court to charges related to the sending of mass commercial e-mail, or spam, and bulletin board postings to millions of Internet users.

Steven George Hourmouzis of Donvale, Victoria, has already had his computer removed and now faces three months in prison after having 21 months of his two-year sentence suspended.

The United States Securities and Exchange Commission (SEC) also recently obtained a judgment against Hourmouzis and his co-accused and will wrestle back US$15,000 in "ill-gotten profits" from manipulated stock movements on the Nasdaq exchange.

In what is being hailed as one of the first criminal prosecutions of its kind, two Australian men were charged with criminal offenses in both Australia and the US in May.

The case was brought by the Australian financial watchdog, the Australian Securities and Investments Commission (ASIC).

The landmark investigation by ASIC and the SEC was sparked by spam and Web message board postings in May of last year containing information about the stock of a US company called Rentech Inc.

The two men were charged with sending the messages urging investors to buy Rentech stock.

Rentech, traded on the Nasdaq market between 1991 and August 1999, develops technology processes that convert gaseous and solid compounds containing carbon into liquid hydrocarbon.

The spam, Raging Bull and Yahoo message board postings claimed the company's stock was about to jump to $3 or more from around 33 cents, when patents were released. Other promises about the company's shares were made, prompting recipients to buy the stock.

ASIC said that more than 4 million e-mail messages were sent out. The next trading day, Rentech's stock doubled "on trading volume that was more than 10 times the previous month's average trading volume."

The watchdog alleged that the spam messages and Web board postings contained information that was false and misleading and was intended to induce investors to purchase Rentech stock.

Hourmouzis had bought 65,000 Rentech shares through a stock brokerage in Canada a few days before the spam e-mail was sent out and the Web board messages were posted. He then sold the shares on the first trading day after the spamming, raking in a profit of approximately A$17,000 (US$8,891).

Hourmouzis pleaded guilty to the charges related to misleading stock information. He also pleaded guilty to the "interference with, interruption of or obstruction of the lawful use of file server computers" operated by a range of Australian companies that received the spam "by means of a telephone facility operated by Telstra" - the national telecommunications carrier.

The Judge earlier ordered his computer removed and Hourmouzis will now spend three months in jail because of the stock trading spam.

Reported By Newsbytes,

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