Fraud
General Fraud
Offshore Tax Havens Money Laundering
Organized Crime
Securities Fraud
Backgrounder - Securities Fraud using the Internet In the past, hypesters rode elevators whispering to each other about stocks that were about to take-off in hopes of being overheard by gullible investors. As the word spread, buyers would bid up the price of the stock. The increase would spur others to buy ("I told you so!"). Inevitably, the stock price would collapse, but not before the hypesters unloaded their cheap shares at the peak. The Internet has given such hypesters undreamed of power. With its broad reach, they have the largest megaphone in the world. Their schemes fall on the Net fall into three main types. Sham offerings Here, swindlers create fancy Web sites and use spam - mass e-mail's - to pitch securities that either don't exist or are misleading. Sometimes the scams are exotic, among them eel farms, coconut plantations, and projects to explore asteroids close to Earth. Securities regulators in California have taken action against such wacky investment opportunities as a floating condominium and a time machine. In the matter of Turner Phillips, a packaged office service, phony letterhead, and website copied from a legitimate securities dealer were used to create the illusion of substance where none existed. Following an idea pioneered by Australia, the U.S. Securities and Exchange Commission (SEC) has a website for a phoney company (McWhortle Enterprises) to educate investors about sham offerings. Market
manipulation A popular version of this scam is the "pump and dump" where con artists circulate bogus information designed to push up a stock's price, and then sell their shares at the inflated level. This can work the other way, too. In what's called cyber-smear, often perpetrated by short-sellers, the objective is to drive down the price of a stock on false information. Market manipulation is most easily carried out on small-cap companies with thinly traded stock. Illegal
touting Here, fraudsters or promoters make glowing comments about a particular stock without revealing to prospective investors that they have been paid to do so. If the information is bought and paid for, investors have a right to know. A 15-year-old high-school student named Jonathan Lebed used the Internet to promote stocks from his bedroom in New Jersey. Armed only with accounts at A.O.L. and E*Trade, Lebed bought stock and then, "using multiple fictitious names," posted hundreds of messages on Yahoo Finance message boards recommending that stock to others. Between September 1999 and February 2000, he did this eleven times, eventually making $285,000. Lebed was the first minor ever prosecuted by the SEC for stock-market fraud. |