Facebook & Twitter used in stock fraud: U.S. prosecutor

The Facebook logo displayed on a computer screen in a file photo. REUTERS/Thierry Roge

NEW YORK (Reuters) - Facebook and Twitter social networking sites were used to tout stocks in a classic “pump and dump” fraud of about $7 million that was uncovered during a cocaine-trafficking probe, U.S. prosecutors said on Tuesday.

Investigators discovered the fraud in a two-year probe of suspected trafficking by longshoremen and others of 1.3 tons of cocaine worth $34 million through the Port of New York and New Jersey officials said.

A statement by the Manhattan U.S. Attorney’s office said 11 out of 22 people charged used more than 15 web sites, Facebook pages, and Twitter “feeds” to “defraud the investing public into purchasing stocks that were being manipulated by participants in the conspiracy.”

A spokeswoman for Twitter declined to comment on the announcement. A spokesman for Facebook declined to comment.

Eight longshoremen and three others face narcotics trafficking charges. Eleven people, including one longshoreman, face charges of conspiracy to commit wire fraud in the purported stocks scheme.

Documents filed in Manhattan federal court said the 11 were from New York, Florida and Pennsylvania. They are accused of orchestrating web site links that touted picks in four penny stocks said to be based on the authors’ expertise and independent research.

They face up to 20 years in prison if convicted.

None of the stocks were identified in court documents, which said more than $3 million was accrued in illegal gains by the accused and that shareholder losses amounted to more than $7 million.

The case is USA v. Susser et al, U.S. District Court for the Southern District of New York, No. 10-mag-2190.

Reporting by Grant McCool; Editing by Tim Dobbyn