Last week, a variety of federal agencies engaged in what was, in most respects, a routine drug bust, albeit a very large one. A group of longshoremen were charged with smuggling 1.3 metric tons of cocaine through ports in New York and New Jersey. What made this all unusual was a twist that you don’t see all that often in cases like these: A dockworker also was accused of involvement in a pump-and-dump stock scheme.

The feds on October 5 charged eight longshoremen and three others in the $34 million drug case. One longshoreman and 10 others were charged with wire fraud involving securities. All but one of the 22 people charged in the sprawling investigation of the docks has been arrested.

The case raises some interesting questions that aren’t touched on in the indictment, such as whether organized crime was involved. But what I think is even more interesting is that it harkens back to an old verity in the world of stock fraud—a topic that I delved into in my 2003 book Born to Steal—which is that the people engaged in stock scams are often interconnected, forming networks of friends and associates that often are far more extensive than immediately meets the eye.

Evidently, the feds—including the Waterfront Commission created during the On the Waterfront era of the early 1950s—were pursuing a drug case, and while doing so stumbled into a massive pump-and-dump stock scheme that was totally up-to-speed technologically. The defendants are accused of using Facebook pages, Twitter feeds, and websites to pump the stocks. According to the indictment of the stock-fraud defendants, the scheme was uncovered last January, when federal investigators arrested a longshoreman as part of their drug investigation.

The longshoreman promptly pulled a “Terry Malloy,” ratting out his friends. Through him, the authorities found another longshoreman, who decided as well that his personal fate resided with turning informant. That individual is referred to in the indictment only as “CS” (as in “confidential source”).

The feds say that “CS” and others were up to their eyeballs in a stock-fraud scheme that dates back to 2005. And that’s where it gets interesting. One of the defendants, a 38-year-old Texan named Stinson Bland, was accused of being involved in the pump-and-dump element of the scam. In the indictment, Bland is described as being involved in a penny-stock website called Pennypayday.com, which bills itself as providing "Insight on Undervalued Penny Stocks Undiscovered by Wall Street Pros." At last look, the site was still going strong. Bland was arrested last week in Texas, and federal court records don’t indicate that he has a lawyer just yet.

But that’s not the extent of his affiliations with alleged microcap chicanery. A few years ago Bland was on the quasi-legitimate side of the microcap world, operating a now-defunct website called MN1.com. It worked hard to promote OTC companies, through this kind of thing, promoted naked short-selling conspiracy theories, and featured interviews with small-cap luminaries such as Patrick Byrne, CEO of Overstock.com, and Daniel B. Carr, the then-CEO of Javelin Pharmaceuticals

MN1.com went offline in late 2007 after an unfavorable media report, and then the site’s founder, Joshua Wayne Lankford, was indicted for stock fraud early in 2009. He promptly went on the lam and remains out of pocket, according to a recent report.

MN1.com went offline in late 2007 after an unfavorable media report, and then the site’s founder, Joshua Wayne Lankford, was indicted for stock fraud early in 2009. He promptly went on the lam, and remains out of pocket, according to a recent report.

Lankford was subject to Securities and Exchange Commission sanctions before he was indicted, and the complaint against him—you can read it here—is 11 pages of pumping and dumping similar to the latest bust. That case involved a Tulsa attorney and a Canadian stock promoter in addition to Lankford, and was, in turn, related to this 2008 enforcement action.

There are plenty of unanswered questions concerning the stocks case. The indictment speaks of “multiple individuals” involved in the pump and dump, which involved a number of unidentified stocks and brokerage firms. Who are they and what are their backgrounds?

Those are interesting questions, but only for those of us with a professional interest and those who like to delve into the intricacies of stock fraud. At bottom, this case, like all other penny-stock cases, involves small investors doing things they shouldn’t do: buying stocks over the phone, or based on recommendations by online penny-stock newsletters. This case demonstrated something that's been apparent for years—that the Internet has largely replaced cold-calling as the primary modus operandi of stock thieves. But I do mean "primary," as cold-calling is still commonly used.

If you stay away from stocks peddled in that manner—or, perhaps, just avoid penny stocks entirely, unless you’ve researched them to the hilt—you’ll never have to worry about whether the stock you’re buying has passed through the hands of characters who seem as if they’ve walked out of an old late-night movie.