Re: Virtual Stock Market or Virtual Scam?
From today's NY Daily News:
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Virtual Stock Exchange
A Real Pyramid Scheme
When a virtual stock trading game requires real money, it's a gamble.
That's the bottom line on an Internet site called Stock Generation (www.stockgeneration.com), which boasts that players can double their money every month trading virtual stocks on a virtual stock exchange.
The splashy site is full of charts showing stock values going up and up. It makes it seem that any investor will reap big rewards.
But New Yorker Felicia Powers said, "I have a number of friends who have invested. They thought their money had grown, only to find out, months down the line, they now have a zero balance."
Her question: What's it all about?
To find out, I asked the experts at the North American Securities Administrators Association, an organization devoted to investor protection.
Its membership consists of securities administrators in the 50 states, the District of Columbia, Canada, Mexico and Puerto Rico.
Christine Bruenn, securities administrator for the State of Maine, was unimpressed.
"This appears to be another creative way to separate people from their money," she said.
Whether stocks go up or down depends on luck.
More troubling, there is no indication of who the promoters are, what their qualifications are to run a gambling site and whether there is a government regulator anywhere keeping an eye on them.
Bruenn tried to trace the promoters.
"Without doing involved investigation, the first link is to Budapest, Hungary, so who knows where they are and who they are," she said.
Stock Generation has a headquarters on Dominica in the Caribbean, but no one there would respond to our questions.
Players also are encouraged to set up their own Web sites and make profits by running yet another virtual stock exchange.
In other words, it's a pyramid scheme. To keep money coming in, new players must be recruited constantly, or the pool dries up and the game collapses.
Bruenn's advice: "This has all the indications of a scam. Consumers would be well-advised to avoid this site and others like it."
Tomorrow: avoiding Internet investment scams
Asa Aarons is a consumer reporter for WNBC-TV, Channel 4, News. His Daily News column appears Mondays, Tuesdays, Thursdays and Fridays. Send your questions to: Ask Asa, P.O. Box 3310, New York, N.Y. 10116, or e-mail him at DNconsumer@aol.com. Questions can be answered only through this column.
Original Publication Date: 6/1/00
nydailynews.com
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A sample question from the stockgeneration.com FAQ:
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1. All this is too good to be true and so I have serious doubts. How can I possibly be certain of getting my money back? Especially since it will have to be transferred to a region known as a haven of fraudulent operations?
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But you are not being asked to accept anything on the basis of trust. The mechanism of the operation of SG Virtual Stock Exchange is described quite elaborately on the site and you can easily figure it out yourself.
Especially so since there is nothing extraordinarily complicated here.
Let us look at the situation from the point of view of the player and that of the Stock Exchange.
From the point of view of the player it looks like as follows.
There is an already evolved balance of buying and selling. As long as it remains as it is, everything is calm and there is no reason to worry about one`s shares. If it is disturbed, one must be more attentive. However, since the full report on all the operations carried out at SG is published daily (see Yesterday's Transaction), in practice the player finds himself/herself fully insured against any unexpected events (it is unclear, though, what kind of events exactly, since all the days in the virtual world of SG are the same like drops of water) and always has an unlimited opportunity to react to them accordingly. Especially so, because in accordance with SG`s conditions the player can get rid of his/her shares at any moment.
Everything is clear from the point of view of the interests of the Stock Exchange herself as well.
The Exchange receives her 1.5% of every buying-selling operation and also earns money from the difference between the prices of buying and selling shares (BUY price - SELL price). The result is having more than enough. Therefore, the Exchange herself is more interested in maintaining her good reputation and stability of work than anybody else. That is absolutely obvious.
And therefore all the doubts concerning "getting your money back" are totally out of place in this context. Since hardly is it likely that all this was organized only with the aim of luring just you into the game and expropriating just your money while ruining an excellently established venture in the process, is it?
As far as our location is concerned, all it comes down to is the fact that at present this is practically the only region in the world where a license for organizing a gambling game on the Internet can be obtained. However, we can assure you that this was far from easy!
In particular, to start with, in Dominica itself a council of special experts spent at least half a year examining the game (exactly on the subject of possible fraud), following which the decision on issuing this given particular license was approved by the Parliament of the country (!). Each license is signed by the finance minister personally. There is a copy of our license on the site (or CLICK HERE), so you can check it for yourself. Subsequently, having received the license, the firm must have her account exclusively in the National Bank of Dominica and her work is constantly controlled by special state organs. The firm must also create a special insurance fund, periodically submit the findings of independent auditors to the controlling organs, and so on and so forth.
As you can see, it is indeed far from being simple. In any case way, may this be the very reason why there has not been a single financial scandal in Dominica so far?
stockgeneration.com
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- Jeff |
