Fraud in the InternetDate: April 11, 2005
Source: Computer Crime Research Center
The Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort, or money. Anyone can reach tens of thousands of people by building an Internet web site, posting a message on an online bulletin board, entering a discussion in a live "chat" room, or sending mass e-mails. It's easy for fraudsters to make their messages look real and credible. But it's nearly impossible for investors to tell the difference between fact and fiction.
The types of investment fraud seen online mirror the frauds perpetrated over the phone or through the mail. Remember that fraudsters can use a variety of Internet tools to spread false information, including bulletin boards, online newsletters, spam, or chat (including Internet Relay Chat or Web Page Chat). They can also build a glitzy, sophisticated web page. All of these tools cost very little money and can be found at the fingertips of fraudsters.
Consider all offers with skepticism. Investment frauds usually fit one of the following categories:
The "Pump And Dump" Scam
It's common to see messages posted online that urge readers to buy a stock quickly or tell you to sell before the price goes down. Often the writers will claim to have "inside" information about an impending development or to use an "infallible" combination of economic and stock market data to pick stocks. In reality, they may be insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by gullible investors. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls and investors lose their money. Fraudsters frequently use this ploy with small, thinly-traded companies because it's easier to manipulate a stock when there's little or no information available about the company.
Be wary of messages that read: "How To Make Big Money From Your Home Computer!!!" One online promoter claimed that investors could "turn $5 into $60,000 in just three to six weeks." In reality, this program was nothing more than an electronic version of the classic "pyramid" scheme in which participants attempt to make money solely by recruiting new participants into the program.
The "Risk-Free" Fraud
"Exciting, Low-Risk Investment Opportunities" to participate in exotic-sounding investments – such as wireless cable projects, prime bank securities, and eel farms – have been offered through the Internet. But no investment is risk-free. And sometimes the investment products touted do not even exist – they're merely scams. Be wary of opportunities that promise spectacular profits or "guaranteed" returns. If the deal sounds too good to be true, then it probably is.
At one time, off-shore schemes targeting U.S. investors cost a great deal of money and were difficult to carry out. Conflicting time zones, differing currencies, and the high costs of international telephone calls and overnight mailings made it difficult for fraudsters to prey on U.S. residents. But the Internet has removed those obstacles. Be extra careful when considering any investment opportunity that comes from another country, because it's difficult for U.S. law enforcement agencies to investigate and prosecute foreign frauds.
Hundreds of online investment newsletters have appeared on the Internet in recent years. Many offer investors seemingly unbiased information free of charge about featured companies or recommending "stock picks of the month." While legitimate online newsletters can help investors gather valuable information, some online newsletters are tools for fraud.
Some companies pay the people who write online newsletters cash or securities to "tout" or recommend their stocks. While this isn't illegal, the federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so. Instead, they'll lie about the payments they received, their independence, their so-called research, and their track records. Their newsletters masquerade as sources of unbiased information, when in fact they stand to profit handsomely if they convince investors to buy or sell particular stocks.
Some online newsletters falsely claim to independently research the stocks they profile. Others spread false information or promote worthless stocks. The most notorious sometimes "scalp" the stocks they hype, driving up the price of the stock with their baseless recommendations and then selling their own holdings at high prices and high profits. To learn how to separate the good from the bad, read our tips for checking out newsletters.
We can use as the best example of the Internet fraud this letter that our organization obtained thought the E-mail :
With due respect, trust and humility I write you this proposal which I believe would be of great interest to you.
I am MRS TINA GOGO the wife of late DR.DONALD GOGO of blessed memory. Before my husband was killed by rebel forces loyal to Major JOHN PAUL KOROMAH. He was the Director General Gold and Diamond Mining Corporation(G.D.M.C.) of Sierra Leone.
Two days before his death, he managed to sneak a written message to me, explaining his condition and concerning trunk box of valuables containing money and diamonds, which he concealed under the roof. He instructed me to take our children and move out of Sierra Leone immediately to any neighbouring country. Eventually it resulted into full war, I became a widow overnight, helpless in this hopeless situation.
Daughter and I my son managed to escape to Abidjan, Ivory Coast through the help of my husband’s friend. The cash inside the box was USD $ 25.5 MILLION (TWENTY FIVE MILLION FIVE HUNDRED THOUSAND US DOLLARS), and DIAMOND, due to fear and limit right as a refugee I deposited the items with private security company with my son’s name MR. JOGO GOGO (JR). Be informed that the real content of the boxes were not
disclosed to the security company as these were deposited as personal effects for security reasons.
Meanwhile I want to travel out of Ivory Coast entirely with this money for investment in your country because of the unsuitable political situation and mostly for the future benefit of my children. I want you to assist us get the money out of the Security Company and transferred into your nominated private account in your country. You shall also source for good investment, so that we can invest the money wisely.
Concerning the money, we are prepared to give you 20% of the total sum and 5% mapped out for expenses. For the interest of this business do not hesitate to call my son MR JOGO GOGO (JR) on telephone number +225 07 89 54 40 ( email address : email@example.com immediately you receive this message for more information to enable us proceed in earnest towards concluding all arrangements, no other person knows about this money expect I, my son and you.
Awaiting your most urgent response.
Thanks for your co.-operation and GOD bless you.
So as you can see the Internet fraud is a big problem of our time that’s why many government agencies of different countries tray to prevent it.
In a year-long law enforcement effort targeting the top 10 Internet scams, 5 U.S. agencies, consumer protection organizations from 9 countries and 23 states today announced 251 law enforcement actions against online scammers in "Operation Top Ten Dot Cons." The top 10 scams were culled from Consumer Sentinel, a database of more than 285,000 consumer complaints established and maintained by the Federal Trade Commission and accessible to more than 240 consumer protection agencies in the U.S. - including every state attorney general - and Canadian and Australian law enforcers. The FTC and the United Kingdom's Department of Trade and Industry, and Office of Fair Trading today announced an information sharing and coordination agreement to combat cross-border fraud. The top 10 targeted scams were:
· Internet Auction Fraud
· Internet Service Provider Scams
· Internet Web Site Design/Promotions - Web Cramming
· Internet Information and Adult Services - Credit Card Cramming
· Multi-level Marketing/Pyramid Scams
· Business Opportunities and Work-At-Home Scams
· Investment Schemes and Get-Rich-Quick Scams
· Travel/Vacation Fraud
· Telephone/Pay-Per-Call Solicitation Frauds (including modem dialers and videotext)
· Health Care Frauds
"The Internet is revolutionizing the way we gather information, shop and do business," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "This collaboration with law enforcement agencies, industry and consumers will create a climate where e-commerce can be conducted with confidence. We want the dot con...
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