It was an incredible week for shareholders of Monarch Services Inc., a little Maryland company that fell victim to what looked a lot like an Internet penny-stock scam.

On Wednesday Monarch's sleepy stock exploded, jumping from $1.20 a share to $4.64 -- a 287 percent jolt.

The Baltimore company's stock is usually so somnolent that days can go by without a single share changing hands. But on Wednesday, 3.4 million shares were traded -- 1,700 times the daily average.

What happened at Monarch to cause that kind of trading?

Absolutely nothing, said chief executive Jackson Dott. No merger talks. No buyout. No bid deal in the works. Just business as usual for Monarch, which publishes a little magazine called Girls' Life and runs a restaurant called Peerce's Plantation.

"It's a bunch of day traders profiting at everybody's expense," said Dott, who has seen spikes like last week's in his company's stock before, but never on such a scale.

The Securities and Exchange Commission does not comment on whether it is investigating trading in a stock, nor does the NASD, which monitors the market.

But SEC officials said that what happened to Monarch stock last week had all the symptoms of a scam.

"Whenever you are witness to a surge in volume and a surge in price of a microcap issue, there is almost always an intricate network of promoters and others at work, whose motives might not be genuine and who may even have an agenda to line their own pockets," said John Reed Stark, director of the Office of Internet Enforcement.

The name of the game is "low-float running." The object: Start a stampede of ignorant penny-stock traders into the stock of some small company that has few shares available for trading -- a "low float" in stock-trading jargon.

It doesn't take much buying to move the price of a thinly traded stock like Monarch. Somebody puts in orders to buy a few thousand shares and as the stock starts to rise, others buy it too. When the stock catches the attention of day-traders who try to make money by jumping onto stocks that are moving up, you can quickly create the momentum for an avalanche like the one that hit Monarch last week.

There are fewer than 900,000 shares of Monarch in public hands. Dott and his dad, founder and chairman Eric Dott, own the rest, about 40 percent of the total. With a stock market capitalization of less than $2 million before the recent run-up, Monarch is considered a "microcap" stock. It trades on the Nasdaq small cap market under the symbol MAHI.

So how can you trade 3.4 million shares a day when there are only 900,000 shares out there?

"Churning" is the answer. Sure, there is some double-counting; that is, sometimes what is really a single Nasdaq trade gets counted twice -- once when a shareholders sells stock to a Nasdaq dealer or market maker and again when the market maker sells that stock to another customer as part of the same trade.

But mostly it's churning. Not all 900,000 Monarch shares were bought or sold that day, but a lot of shares were bought and sold several times -- bought in the morning as the stock was starting to rise, sold a short time later for a quick profit, then bought and sold again and again. It works like a pyramid or a Ponzi scheme. The loser is the one who gets stuck holding the stock when the music stops and can't find another sucker willing to buy it at a higher price.

The "bag holders," as they are known to spectators of this sport, started feeling the pain Thursday, when Monarch stock fell from $4.64 a share back to $2.98, and 1.7 million shares were traded. The stock kept falling Friday, closing down 57 cents at $2.41 on volume of 437,000 shares.

The best seats for watching low-float running in action are in Yahoo's stock-trading chat rooms, where Monarch generates a lot of action, Raging Bull and other Internet investment sites. There you can see lies so blatant as to be laughable.

For example, one person hiding behind an online alias proclaimed that Monarch is about to start a pornography magazine. "A virtual reality porn mag. . . . Will be featured on all the major news channels tonight," that person wrote.

If you missed that on the nightly news, you're not alone. In reality, there is not going to be a pornographic sister publication to Girl's Life, which is aimed at "tweens" in the 8-to-12 age group. As close to sex as Girl's Life comes is answering reader questions like, "I'm going on my first date and I'm worried about bad breath. What do I do?" (Brush your teeth and chew gum.) Nor is there any evidence to back some of the other claims made by people touting the stock on Yahoo. "Monarch Services is at a critical turning point in its history. It is on the verge of a great creation of wealth from the core magazine and restaurant holdings. Forget the past. . . . Look into the land of opportunity. It is here," another person said.

Monarch shareholders will tell you that the company's past is pretty forgettable. It used to own a board-game business, but sold it to toymaker Hasbro in 1998 for $6 million.

As for the future: Well, there is some excess acreage around Peerce's Plantation that might be sold some day for development. But Monarch's new ventures have mostly been flops. Before buying Peerce's Plantation at a bankruptcy auction, the company started a Girl's Life theme restaurant, since closed; a tobacco shop, also closed; and a men's magazine called Adam that lasted three issues.

Hardly a record that would justify this comment on Yahoo: "They told me MAHI will see $100 per share. . . . They are never wrong. So you better buy all you can now. Get a second mortgage and BUY BUY BUY BUY BUY."

Can you believe anybody would fall for that?

And there was more.

"Who cares what this company does?" said one. "They could be makers of manure, but if there is more demand than there is supply for the stock, this stock will skyrocket."

That much is true. The demand may be totally artificial, but when it exceeds the supply, the price goes up. The problem is, of course, that when a stock is manipulated upward it rarely stays up.

"They are very brazen on the chat sites," Jackson Dott said. "I don't think it's funny, but it is silly."

It's also illegal, say officials of the SEC, which has a team of lawyers who monitor Internet chat rooms, electronic newsletters and other sources of stock information, looking for scams.

Some of the people chatting about Monarch stock on Yahoo admit that their strategy is to pump up low-price, thinly-traded stocks, make a quick buck and bail out before the end of the day. They even recommend other stocks that could be run up the same way. Both are fraud as far as the SEC is concerned. Regulators also have found that traders who claim they are just riding the momentum of a rising stock often have connections to the people who started the stampede.

The SEC has brought dozens of Internet stock manipulation cases in recent years. Stopping a scam in progress is problematic, however. If trading is halted when a stock like Monarch shows unusual trading, the stock usually crashes, wounding innocent investors along with the scam artists and the traders riding their coattails.

The best way to avoid getting caught in one of these scams, of course, is not to start day-trading stocks in the first place.

But penny stocks -- which these days means anything under $5 a share -- include little companies that have the potential to be big winners. Low-price stocks have outperformed the blue chips this year. That makes the market even more vulnerable to scam artists.