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U.S. Attorney

for New York's southern district and the

Securities and Exchange Commission

Thursday filed civil and criminal charges against two men, accusing them of manipulating the prices of numerous thinly traded stocks by issuing hundreds of thousands of unsolicited "spam" emails to unsuspecting investors.

According to the civil and criminal complaints, James Sheret, Jr., of Bayside, N.Y., and Glenn E. Conley of Gaston, Ore., sent emails under the banner "AOL Investment Snapshot" to make it appear as though

America Online


had endorsed the spams. AOL did not know anything about the spams, the SEC said; the company did not immediately return a call seeking comment.

Brian Coad, the associate U.S. attorney on the case, said the two men made $700,000 to $800,000 in February alone, and $339,000 between November and early January. Conley and Sheret were both arrested Thursday afternoon, Coad said. Both Sheret and Conley have denied the charges, the SEC said.

"The Internet is rapidly becoming the boiler room of the new century," said Donald Hoerl, associate regional director of the SEC's central regional office in Denver. He added that he wasn't aware of another case that involved the use of spam. He declined to comment on how the SEC discovered the alleged scheme, saying only that the SEC gets tips from "a wide range of sources."

Sheret and Conley, both 31, made a total of more than $1 million in profits by selling stocks immediately after they sent out spams promoting those stocks, according to the civil and criminal complaints. In one case, the two men made a return of 1,951% less than two weeks after making an initial investment of less than $20,500, according to the criminal complaint.

Sheret and Conley opened email accounts at approximately 23 Internet service providers throughout the country, the complaint says, and concealed their identities through false identification information to conduct the scheme.

The SEC complaint also asserts that in some instances, the spams gave the impression that the actual recipient had mistakenly received a message meant for a friend of the sender. The SEC complaint asserts that the two men manipulated the stocks of 57 thinly traded companies since at least November.

The commission is seeking permanent injunctions against Conley and Sheret and the return of the money they are accused of making by stock manipulation, as well as civil penalties. A judge granted the SEC a temporary restraining order against the two men Thursday, Hoerl said.

The U.S. attorney's complaint includes one count of criminal conspiracy to commit securities fraud, which carries a maximum sentence of five years and fines up to $250,000, and 14 separate counts of securities fraud, each of which carries a maximum sentence of 10 years in prison and fines up to $1 million.