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October 2001 Newsletter:
Investment Fraud

As the internet is a tool for learning, shopping, communicating and fun, it is also a profitable playground for fraudsters. Investment fraud is a lucrative business.

The internet provides a way for a single fraudster to reach potentially millions of potential customers (victims) through email, message boards, chatrooms, newsletters, and websites.

Emails are sent usually through mass mailings. Your address was obtained either through a "random generator" software program (junk mail spamming) or (rarely) through a purchased mailing list that you opted into where you gave your consent to receive third party promotions for related products or services. Typically, these emails contain a pressure sales pitch like 'Insider Confidential Information - Act Fast' or 'Once in a lifetime opportunity - little known stock will soar'. Danger signals should pop into your head when any telemarketer, email, postal mail, or stranger says that you will miss a fantastic opportunity unless you pay some money by a particular time.

With online newsletters, the basic key to reliable information and recommendations is to know the reputable company. When you shop on the internet, you shop at stores that you already like and are familiar with. Do the same with online investment newsletters. You can then be sure that when the familiar reputable company says they researched the stock, they did and are not spreading false information or trying to sell a worthless stock so they can later sell their interests for a profit at your expense.

When you are at an 'investment' message board or chatroom, the same basic safety guidelines apply. Remember that user can hide their true identity and pretend to be someone their not. They can even be more than one person at the same time having a conversation leading an unknowing user (you, the potential victim) into believing that they just revealed insider information.

Before investing any monies, each investor needs to research the company before surrendering any monies. Most investors use investment brokers for this tedious and time consuming task.

Researching the company involves checking the backround of the officers and finding out if they have made any money for their investors, getting and analyzing financial statements, and calling each customer listed to verify that they have indeed done business with the company. Now you are ready to decide if this company has a bright enough future for you to consider investing your hard-earned monies.

If a company does not earn more than five million dollars in a fiscal year (a twelve month period), they may not be listed in the Edgar database. You will then need to request a copy of the company's Form D or Regulation A offering circular from the Securities and Exchange Commission at 1-202-942-8090. Check also with your state securities regulator and see if any past disciplinary action was taken.

The Fraud Bureau has a very informative section about investment fraud and Securities Law has concise stockbroker fraud information. If you have already lost monies to fraudulent investment schemes, the Investment Recovery Network can be of invaluable assistance.

Remember the basic rules of internet safety that considerably reduce your chances of an online problem. Refer to the Safety Guide for a quick review. Make this a family or office practice. Constant repetition will make this chore into an everyday practice.