Computer Expert Pleads Guilty to Stock Manipulation Scheme With Hackers

An Arizona computer specialist who did time in prison for his role in an Internet stock-fraud scheme pleaded guilty in New Jersey today to a similar scam.

James Bragg, 41, admitted in federal court in Trenton that he inflated the prices of thinly traded stocks between November 2007 and February 2009 by promoting them through mass e-mails, or spam, and by taking over the brokerage accounts of third parties.

Bragg also pleaded guilty in August 2009 to his role in a scheme led by Alan Ralsky of West Bloomfield, Michigan, who prosecutors said was once “the world’s most notorious illegal spammer.” Bragg, who was sentenced to a year in prison in that case, was released in April, records show. Ralsky is serving a 51-month prison term.

“The conspirators may have updated the fraud with technology, but strip away the army of computers and this is a classic pump and dump scheme,” U.S. Attorney Paul Fishman said in a statement.

Bragg, who pleaded guilty to conspiracy to commit securities fraud and fraud in connection with electronic mail, faces as many as five years in prison. U.S. District Judge Joel Pisano set a sentencing date of Feb. 2.

Bragg’s attorney, Robert Morgan of Detroit, didn’t immediately return a call seeking comment.

Army of Computers

The scheme involved hackers using an army of computers, or botnet, to distribute computer viruses around the world, Bragg admitted.

Bragg and co-conspirators used spam to promote stocks, and hired hackers and spammers to carry out the scheme, according to prosecutors. The conspirators hacked into brokerage accounts of third parties, liquidated stocks and then bought shares of stocks they had manipulated, Bragg admitted.

Bragg, of Chandler, Arizona, was living in Thailand at the time of the scheme, according to his criminal charge. One conspirator, he said, was a stock promoter in Florida; another was a Texas resident who was a middleman between stock promoters and spammers; and a third was a spammer outside the U.S.

The criminal charge didn’t say how much money the scheme generated. Prosecutors said the manipulated stocks included Remote Surveillance Technologies Inc. and VShield Software Corp.

The case is U.S. v. James Bragg, U.S. District Court, District of New Jersey (Trenton).

Editors: Fred Strasser, Andrew Dunn

To contact the reporter on this story: David Voreacos in Newark at dvoreacos@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.