Federal prosecutors conducting a cocaine-trafficking probe discovered that social networking sites, Facebook and Twitter, were used to tout stocks in a classic "pump and dump" fraud "to the tune" of some $7 million.  Investigators had spent the past 2 years investigating Investigators suspected trafficking by longshoremen and others of 1.3 tons of cocaine worth $34 million through the Port of New York and New Jersey.

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."  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.

Eight longshoremen and 3 others face narcotics trafficking charges.  Eleven people, including one longshoreman, face charges of conspiracy to commit wire fraud in the purported stocks scheme.  All told, the scheme involved 4 penny stocks.  They face up to 20 years in prison if convicted.

The case is USA v. Susser et al, U.S. District Court for the Southern District of New York, No. 10-mag-2190.   [NYT Dealbook, 10/6]