LOL not a bad article, for a laugh, flip on down to Lazarus Long.
cnnfn.com
Beware of Net stock scams
You can't believe all that you read
online, particularly when you're investing
By Staff Writer Alex Frew McMillan
April 25, 2000: 8:14 a.m. ET
NEW YORK (CNNfn) - "STOCK ALERT!!!" the e-mail shouts. VICI is hot. "LAST
TRADE: 7/16 ... SHORT TERM PRICE TARGET: 1 1/4. INTERMEDIATE TERM
PRICE TARGET: 3 3/4 ... SEVERAL VERY LARGE CONTRACTS THE
COMPANY INTENDS TO PURSUE AND PUBLICLY ANNOUNCE WHEN
SIGNED."
Victor Industries, a Nasdaq over-the-counter stock, is set for a 700 percent
increase, according to the e-mail. The message points out that the company,
which mines a chemical-cleanup mineral called zeolite, has a "worldwide
market" and "prospects" that include large chemical companies, nuclear
plants, petroleum companies, large nurseries, reservoirs and farms.
And Victor is purportedly lighting up the investment world -- the e-mails are a
torrent as they flood in this month. The same stock alert zipped into CNNfn
mailboxes, unprompted, from numerous addresses such as
research@geocities.com and internetnews@newyorknet.net, all allegedly
tracing back to Access News Corp., a French company based in Paris.
So where do I sign up?
Is Victor really a hot tip? Far from it. Between 1977 and 1996, Missoula,
Mont.-based Victor mined precious
minerals "without notable success,"
according to a document filed with the
Securities and Exchange Commission. In
1996, it started mining zeolite. But Victor
has basically been out of business the past
three years, since its owner contracted
lymphatic cancer. Since 1997, it has
averaged $6,000 in sales a year.
The company isn't dead -- new management is trying to pump new life into
Victor, after the old owner sold it last December. Management claims it has
meetings set up with possible customers, to get the business going again,
though the company won't say with whom it is talking.
Zeolite is a good product, according to Ron Pellett, a management
consultant who is working with Victor, "though you probably never heard of it."
It can be used in nuclear cleanup, like the e-mail implied. But even he
concedes the company is struggling back to its feet.
Pellett says no one with Victor has anything to do with the e-mails, as far as
he knows. He has talked to public relations companies but hasn't hired any, so
he doesn't know who would be sending them out. The purported originator,
Access News Corp., doesn't have a Paris phone listing and didn't reply to an
e-mail.
As far as the messages go, "I'd be suspicious of them probably," Pellett
said.
Don't believe every e-thing you read
It's a wise reaction. Victor's stock hasn't moved rapidly since the e-mails
came out and is still mired in penny stock land. Maybe it will take off; maybe it
won't. But relying on anonymous, unsolicited tips is no way to invest.
Thanks to e-mail and the Internet, it's cheap and easy to lure investors into a
mistake that could be anything but cheap
and easy to rectify.
Junk, nonsense and fraudulent e-mails,
along with bulletin board chatter and bogus
or biased newsletters, are the new take on
the boiler room phone scams and the
"pump and dump" schemes of last decade
and before.
The Securities and Exchange
Commission launched its first "sweep" of
online fraud in October 1998. It brought enforcement actions in 23 cases,
charging 44 people with:
lying about companies they were promoting to manipulate the price
failing to reveal they were being paid to promote them, called illegal
"touting"
or illegally running a company's stock up with the intention of selling
their own shares in it for a quick buck, known as "scalping."
The SEC gets around 300 complaints a day from the public, reporting
suspicious Internet-related investment activity. There have been numerous
sweeps since, and you can be sure many crooks go undetected, or at least
uncaught. Modern communications make stock-touting fraud easy, fast to
commit and hard to trace.
Cheap and easy, and that's just the e-mails
"The really problematic thing about spam is that, using the new technology,
people can send what look like personalized messages to millions of people,"
said Susan Wyderko, director of the SEC's Office of Investor Education and
Assistance. "It's a much more efficient, cheap method of defrauding people."
Who knows why people fall victim to the scams? Most everyone thinks
they're smarter than that until it happens to them.
Maybe it's the newness of the medium. Maybe
people are used to going to the Internet or their
e-mail to get information, so they trust other
information they receive that way. Sometimes the
scammers are very cunning.
Authorities say the most convincing scams
personalize the information well, set up
impressive-looking corporate Web sites, or create
false press releases that seem to have come from
the company. Others disguise e-mails touting a
stock to look like they "mistakenly" made their
way into your e-mail inbox on their way to some
big shot investor -- "Thanks for the heads up, Gary, actually I've already put
$40,000 in XYZ ahead of that merger," and so on.
Beware the out of this world
Sometimes the schemes are outlandish.
Last April, the SEC charged Howard Turney with trying to sell $350 billion in
what the commission says were bogus bonds. Operating under the alias
Lazarus Long, and claiming he was a prince, Turney ran a Web site that said
he was building "new utopia," a new country and "tax haven" that was rising
from the Caribbean on giant concrete platforms built on an underwater
landmass, 115 miles west of the Cayman Islands.
Investors were to become "charter citizens" and were guaranteed a 9.5
percent note, the SEC says. It adds that Turney promoted buying the currency,
too, by saying it could result in returns of up to 200 percent. The Web site
received at least 100,000 hits.
"People seem to sometimes buy on the basis of spam e-mails in a situation
where I'm not sure they would if it weren't coming over the Internet," Wyderko
said. "If somebody found an anonymous tip in the mail, you'd throw it out, or it's
junk mail. Culturally we know that."
Caveat e-emptor
Here are some tips authorities and other sources suggest you heed to avoid
being taken in by Internet and e-mail stock scams:
You never know who you are dealing with online or through the Internet.
Check with the source -- if you are sent an earnings report from a
company, check with the company's Web site.
Treat anonymous or unsolicited e-mails like you would treat anonymous
or unsolicited mail or phone calls.
People using aliases or pseudonyms may have connections or a
financial interest in the company concerned. It is illegal to tout a stock
and get paid for touting it without noting that you were paid, how you
were paid and the amount you were paid. But such fraud is still
common.
Many other fraudsters are not paid directly by the company but own
stock in it or, in reverse, have shorted the stock hoping it will decline. It
is not illegal to lie about a company but is illegal to manipulate a stock
with the intent of profiting from it. Still, such fraud is also common.
Even well-intentioned people give out misinformation. Be careful not to
conflate opinion with fact. Check facts.
Never make an investment decision based solely on what you read
online, the SEC recommends. There have been instances of legitimate
looking corporate or news items online that turned out to be fraudulent.
Look for verification from a second source.
Make sure the address of any information you are reading online
meshes with where you expect to be reading it -- even if a release
claims to be a company's Web site, make sure the Web address
matches the company's Web address.
It is illegal to trade on material, nonpublic information. If someone claims
to be giving you such information, why are they giving it to you? Either
they are willingly jeopardizing themselves, or they don't know anything of
use.
Be especially wary of small, thinly traded companies. These are the
easiest to manipulate and the favorite targets of online and e-mail fraud.
If you invest in companies that do not file financial statements with the
SEC, you are taking your investment life into your own hands. On your
own, you will have to: get and analyze the financials; verify claims about
contracts or developments; call suppliers and customers to ask if they
really do business with the company; check out management to see if
they have made money for investors or, on the other hand, been
convicted of fraud before.
For companies registered with the SEC, you can research their filings
for free through the EDGAR database for any company that has raised
more than $5 million. Even companies that have raised less may file
with the SEC. Call (202) 942-8090 to check for filings, particular for
small companies not on EDGAR.
No investment is without risk. Beware of promises of "guaranteed"
returns or large, rapid gains.
If there is pressure to invest or upfront fees, walk away.
Be especially careful when investing outside the United States. While it
used to be expensive and complicated for offshore conmen to target
U.S. investors, the Internet has made it much easier. It is difficult to
pursue and prosecute many offshore scam artists.
If you come across suspicious investment activity online, the SEC
encourages you to contact it via e-mail at its investor education and assistance
office (help@sec.gov) or its division of enforcement (enforcement@sec.gov).
You may also want to enter a complaint with the enforcement division's
complaint center. |
