STEVE,
Here is but another example of MY LIES be sure and read this closely so you and your group can warn everyone on the thread to do exactly the opposite of what is said here. You will want to point out that especially the things being said about threads like this are exactly what I do, and therefore should be ignored but since that is so hard for inquiring minds to ignore, you must school them in how to wash their brains of this influence.
A very good way for you to do this is to send e-mail like was done to DUG awhile back and first WARN him about me and when that didn't work THREATEN HIM and subject him to VILE ABUSIVE FOUR LETTER WORDS OF ATTACK. After all what is done on SECRET-E-MAIL can't be seen here, doesn't sit here to haunt anyone, and MOST PEOPLE DON'T HAVE THE
COURAGE THAT DUG EXHIBITED BY POSTING SOME OF IT AND TELLING ABOUT
THE REST.
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ONLINE INVESTMENT SCHEMES
Fraud and Abuse in Cyberspace
Unwary investors are in danger today of being taken for a ride on the information superhighway.State securities regulators around the U.S. are concerned about the explosion in illicit investment schemes now flourishing on commercial bulletin board services (such as Prodigy, America Online and Compuserve) and the informal web of computer networks that make up the Internet. An estimated four million U.S. households that already have access to the major online services are
being exposed to hundreds of fraudulent and abusive investment schemes, including stock manipulations, pyramid scams and Ponzi schemes.
While the experienced pioneers who explored the online frontier are aware of some of the major rip-off techniques now in use, the investment fraud problem could reach epidemic levels over the
next few years as several million unsophisticated newcomers crowd onto the once lightly traveled information superhighway. Cvberspace (as the online world is known) has the potential to educate investors, helping them to become much savvier consumers. Today, any home equipped with a
computer and modem is iust a few keystrokes away from a wealth of instantly accessible research data and financial news. The tragedy here will be if cvberspace comes to be regarded as a lawless
"Wild West" haven for investment swindlers and, as a result, is shunned by the very financial consumers who could be empowered by it.
THE STATES TAKE ON CYBER-SCHEMES
The Missouri Securities Division and the New Jersey Bureau of Securities announced on June 30,1994 the first regulatory actions taken in the U.S. against online investment schemes. At least three
other states currently have investigations underway invo lving suspected investment fraud and abuse in cyberspace. Here are the highlights of these and other key developments in known or suspected
abuses in the online investment world.
According to a cease-and-desist order filed on June 30, 1994 by the Missouri Securities Division, a stockbroker unlicensed to do business in Missouri touted his own services and also made dubious claims for stocks not registered for sale in the state. The broker identified himself on one of the largest commercial online services in the U.S. as 'A GOOD TRADER.'In the online messages, the broker included his "800" telephone number and an offer to provide more information by e-mail or regular mail. In in effort to entice customers, he made a number of dubious claims, implying in one case that Donald Trump was a major,behind-the-scenes player in a tiny cruise line with a thinly-traded stock. The Missouri action resulted in his employer, Investors Ass ociates, withdrawing from the state of Missouri. The brokerage firm claimed to have been unaware of the suspect online touting by the broker,who supposedly engaged in the activity after-hours from his home computer.
Investors were told "how to make big money from your home computer" as part of the "Electronic Message" scheme promoted bv a San Antonio man and at least nine other individuals scattered around the U.S, according to a cease-and-desist action filed on June 30,1994 by the New Jersey Bureau of Securities. In what might be referred to as an 'e-mail chain letter," the promoter claimed that, in exchange for $5, investors could earn a return of $60,000 in just three to six weeks. Participants were told to send $1 to each of five people on an online list. Then, those who sent money were to add their own name to the list and post a message explaining the scheme on at least 10 different computer bulletin board sites. In practice, the scheme amounted to a h igh-tech variation on the old pyramid scam, which is barred under federal and state laws.
State securities agencies and other investment regulators are now looking into cases in which the price of shares in little-known, thinly-traded stocks appear to have been systematically manipulated through messages posted on conunercial bulletin board services and on the Internet. Interlock Consolidated Enterprises, Inc., a Canadian com pany, was reported to have landed a major contract to construct modular housing in the former U.S.S.R. When the company become the topic of online hype in early 1994, its stock jumped from 42 cents to $1.30, before falling back to 60 cents. Though the ob scure stock traded only 175,000 shares in all of December 1993, the swirl of online posting and rumors may have pushed the daily volume of the stock as high as 600,000.
The price of the shares of stock in another Canadian company, Wye Resources, Inc., which was reported to own a Zaire diamond mine where a major strike had been made, more than tripled in price in early 1994. After extensive online hyping, the stock, which was traded over the counter in Canada outside of an established exchange, collapsed. Authorities stepped in and called a halt to the trading. As one online observer of this apparent "pump and dump" scheme noted: "The company's story was made t o sound like the biggest gct-rich-quick prospect this side of Mars, and a lot of naive investors began buying. The stock, as ALWAYS happens, went from 20 cents to $1.40 in a matter of a month, and the hypesters were talking about how great they all were ... until the Alberta Exchange halted trading on the stock the next day, investigating the manipulation of the share price...' (Emphasis in original)
State securities regulators emphasize that the problem of illicit and abusive online investment schemes is a new one that has the potential to spread like wildfire as the result of the increasing popularity of
commercial bulletin board services and the Internet. "We are just now starting to get complaints, and a growing number of states and other regulators are in the first stages of focusing on this latest
variation on the unending theme of investment fraud and abuse,' explained Iowa Superintendent of Securities Craig Goettsch, who also serves as president of the North American Securities Administrators Association (NASAA). 'The states recognize the high value that is placed on privacy and minimal government intrusion in cyberspace, but the reality is that investment fraud is illegal and will be combatted by the states wherever it takes place. We want to make sure that online investors know that they should proceed with extreme caution when traveling the information superhighway."
THE ONLNE WORLD: A PRIMER
Cyberspace was once a place inhabited largely bv government agencies and academics linked together through a decentralized collection of computer networks that came to be known as the "Internet.' The late 1980s and early 1990s gave birth to a torrent of commercial entrants into cyberspace, with the way led by Compuserve and then Prodigy and America Online. By the end of this year, an estimated four million American households will be online with these commercial services, which are the three largest s uch enterprises in the U.S. aditionally, hundreds of smaller companies have emerged to provide bulletin board services and local access to the world of Internet.
The result: cyberspace is no longer an ivory tower world. The number of Americans who are online has jumped 90 percent since 1992 alone; their ranks are expected to double or triple over the next two to three years. For example, America Online more t han doubled in size in a nine-month period, going from 300,000 users to over 700,000. The Vienna, VA.-based company has projected that it will sign up its two-millionth subscriber by the end of 1996. Thanks to a new generation of sophisticated software programs that take much of the pain out of navigating the much more complex Internet, more and more of those who are online spend much or all of their time online outside of the confines of the commercial services.
For newcomers, cyberspace can be an enormously complicated and confusing place. But the appeal of the online world is easy to understand. Those who go online have opened up to them a dizzying
array of computer bulletin boards (where messages can be p osted under specific topic headings),live discussion groups (in which members have real-time "chats" through their keyboard), email (the cyberspace equiv:dent of what is referred to as "snail mail"), information (in the form of research,newswires, and e lectronic versions of magazines), ways to buy goods and services (including airline
tickets and office supplies) and games. Though some dismiss the online world as just another passing fad ("CB radio with typing," in the words of one humorist), the emerg ing promise of cyberspace was
perhaps best summed up by the New York Times, which has described the Internet as the world's 'new mass information market.'
INVESTMENTS ONLINE: NOT "COMMERCIAL FREE"
Those who have never journeyed to cyberspace may be under the impression that the online world has not been "commercialized." This misunderstanding arises not only from the former 'ivory tower'
reputation of cyberspace, but also as a result of a few, widely publicized incidents in which commercial interests have attempted to advertise their services through indiscriminate use of e-mail messages and message-posting on multiple bulletin boards. Such individuals have been "flamed" (a sort of "hate e-ma il'), with the result that some have been driven into silence or even out of cyberspace altogether.
There is little evidence of such anti-commercial sentiments when it comes to bulletin boards and discussion groups devoted to investing topics. Commercial bulletin board services offer special areas to subscribers on a wide range of professions and ot her interests, ranging from the law to romances.But one of the most powerful "magnets" drawing consumers to the commercial services and the
"unmoderated" world of the Internet today are the growing number of bulletin boards and discussion groups devoted to investment tips, advice and solicitations.
According to one regulatory agency's count, more than 5,600 new messages on investment topics were posted in 969 different topic areas featured on the Prodigy service during a recent two-week period. (Prodigy estimates that it now processes a total of 75,000 new messages of all types daily.)Many of the investment-specific messages now appearing on commercial services and the Internet openly hawk brokers, investment advisers, financial newsletters, and specific investment deals.
Though many of the messages simply offer general stock-picking advice or mention other investment possibilities, others tout specific stocks, money-making enterprises and service providers. Far from
being free from commercialism, investment-specific bulletin boards are now littered with sales pitches, offers of details transmitted privately via e-mail and toll-free '800' numbers. All three of the
largest commercial computer bull etin board services aIso offer electronic trading links to major brokerage firms.
THE RISE OF ONLINE INVESTMENT SCHEMES
Combine the circulation of the W:ill Street Journal (1.8 million) and the USA Today (1.6 million) and you still fall short of the 'self-publishing' reach available to someone who joins a few commercial computer bulletin board services (four million sub scribers on the "Big Three" alone). As one online investor has marveled: "'With the online world growing quickly, we can all reach hundreds of thousands of people with a single (message) posting With a few keystrokes, a couple of accounts,and a macro or two, I can make it appear that many people are posting on manv different systems,
all talking up a stock ... never before has an individual been able to reach so many pcople, so easily,quickly, or inexpensively."
Just as investment con artists and other fast-buck operators wasted no time in taking advantage of the mails and the telephone as means by which to fleece large numbers of unsuspecting investors, so too have swindlers started in with a vengeance to exp loit cyberspace. While many of those on bulletin boards dedicated to investment topics are interested in little more than swapping ideas about specific stocks and exchanging general financial advice, there is increasing evidence that a shady group of individuals are milking the online world in order to enrich themselves in what is often a blatantly fraudulent and abusive fashion.
State securities regulators have Identified the following as being among the major investment scheme problems in the online world today:
Manipulation of obscure, thinly traded stocks. Most commercial bulletin board services allow individuals to post messages not only under an alias ... but multiple aliases. Since it may be impossible for another subscriber to ascert ' the true identity of the individual behind the message (or even if a series of messages are being entered by just one individual under various aliases), there is enormous potential for manipulation of little-known companies that have a small float (the number of shares trading hands). The potential for disguised identities here grows substantially when a schemer uses multiple aliases on multiple bulletin boards, thus creating the illusion that a stock is the talk of all of cyberspace. Acting alone or with accomplices, one company insider, broker, public relations executive or even just a large shareholder can leave numerous messages calculated to spark interest in an obscure stock. Once a 'thread" (in this case, a series of related messages about a stock) is started, it will show up on the computer bulletin board and be readily accessible by anyone who enters the bulletin board. Among the most popular targets for cyber-manipulation today are Canadian gold, silver and diamond mining stocks.
Through a combination of puffery, speculation, and breathless claims of supposedly inside information about pending announcements, product innovations, and new contracts, the schemers seek to run up the price of the stock, which starts rising as unwary in vestors read of the *great opportunity" and buy shares. In response, the insiders take their shares (bought at the low, "pre-hype' prices) and sell them into the rising market. As interest builds, dozens of messages may be posted about the stock. When the hype-fueled stock price falters, the promoters may blame unnamed short sellers. Sometimes, losses suffered by the unsuspecting are made even worse by ruthless promoters who urge victims to "dollar average" and keep buying shares, even at the falling prices. Talk of the stock then disappears from the board. Investors who are left holding the bag can do little more than post plaintive messages:
"Whatever happened to Company X?"
Misconduct by phony and unlicensed brokers/investment advisors. One state securities agency today is investigating a case in which a women held herself out on a commercial bulletin board service as an investment advisor (IA), offered investin g advice and solicited clients. The state agency started to receive complaints from around the nation, based on the extreme claims the phony IA made about the potential for return on investments and on her possible mishandling of client accounts.
In other instances, states are concerned that brokers may be attempting to drum up new business... without the supervision of their employers and while making liberal use of illegal assurances about the potential for profit in certain investments. The problem here goes far beyond the oral comments that an aggressive broker might make to a sophisticated client, since an online message is available to be read by, not one, but hundreds of thousands of investors. Additionally, states are concerned about bro kers who may try to rope new clients without regard for the clear state interest in keeping individuals with a history of fraud and abuse outside of their borders.
Undisclosed interests of promoters. The anonymity of cyberspace is exploited to the hilt by schemers who promote fraudulent and abusive investment schemes. In reading a bulletin board message about a stock, you have no way of knowing if the person involved is a company official, PR representative or market-making brokerage firm. Has the person hyping the stock been paid to do so and, if so, has that fact been disclosed? (In one instance, an individual running a private bulletin board discloses there that he receives compensation for his stock promotion activities, but does not make a similar disclosure when he posts messages on major commercial bulletin board services.) In some of these cases, the role of the person involved in the scheme is such that he or she is considered an "agent" of the stock issuer and, as a result, is subject to strict legal requirements about public statements, disclosure language and penalties for intentional "misrepresentations and omissions" intended to move stock
prices.
Promotion of "exotic" scams.The manipulation of the stock of publicly-traded companies and misconduct by professionals are just two types of problems that state securities agencies have detected on commercial bulletin board services and on th e Internet. In hundreds of other cases, messages have been posted promoting a wide variety of highly suspect, unregistered investment deals (e.g., wireless cable television "build-out" schemes, ostrich farming, and viatical settlements), as well as flat- out rip-offs (e.g., pyramid schemes, including a number of twists on "chain e-mail letters," and Ponzi scams). These so-called "exotic" securities may pose a greater threat to consumers than other cyber-schemes, since out-and-out scams often appeal to in dividuals who do not feel sophisticated enough to speculate in stocks. The experience of state securities regulators is that "exotics" are often just as costly to burned investors, since many schemes involve minimum investments of $5,000 or more.
Some of the investment fraud and abuse problems now cropping up in cyberspace are indistinguishable from those that have been in circulation elsewhere for years and, in some instances,even decades. But access to the online world represent an enormous advance in the ability of con artists to victimize the unwary. Even the fastest-talking boilerroom operator would be hard-pressed to make more than 150 "cold call" telemarketing pitches in day, where-as the fast-buck swindler with access to cyberspace c an send e-mail to many thousands of individuals in less than an hour.The same con artist can then post a message that may be read in a matter of weeks by tens or even hundreds of thousands of individuals and around the globe,. As one veteran state secu rities agency official has observed about cyberspace: "In my 32 years of investigating fraud, this is by far the
greatest money-making machine for scammers that I have ever seen."
PROTECTING YOURSELF AGAINST ONLINE INVESTMENT SCHEMES
What are the rules of the road for investors who decide to travel the information superhighway?
Perhaps the most important thing to keep in mind is that there will never be enough "cybercops" to keep the online world free from fraud and abuse. Even though state securities agencies and other investment regulators have mounted serious efforts in r ecent months to spot and stop cyber-fraud,the simple truth is that there are far too many places in the online world (particularly in the almost entirely unregulated Internet) for swindlers to set up shop. Even if the several thousand people in the Unit ed States who work at the Securities and Exchange Commission (SEC), state securities agencies, National Association of Securities Dealers (NASD), and stock exchanges, were somehow able to put aside all other tasks in a massive bid to shut down online inve stment scams, it is doubtful that this pervasive problem would be stamped out altogether.
This means that the person who ventures into cyberspace should do so with great caution, being mindful of the fraud and abuse that awaits online. The good news is that there are self defense steps that you can take to fend off cyber-fraud:
Don't expect to get rich quick in cyberspace.The online world is filled with information that can help you become a smarter investor. Unfortunately, cyberspace also is home to a growing amount of investment fraud and abuse. The trick here is to keep your excitement and expectations about the promise of the online world in perspective. A failure to exercise the caution and skepticism that is a healthy response to all unfamliar investment opportunities could be a fatal misstep here !
Don't assume that your online computer service polices its investment bulletin boards.When it comes to suspicious or even blatantly fraudulent investments, the vast majority of services take a "hands off" attitude. Even the ones that do minimal policing are swamped by the volume of postings and do not have the expertise to spot investment swindles. In the "wild and woolly" world of the Intemet, just about anything goes. Nothing is in place to prevent a con artist from posting one (or dozen s) of pitches for a swindle. In this largely unregulated cyberspace environment, often the only check on abusive messages is "flaming" by other users.
Don't buy thinly-traded, little known stocks strictly on the basis of online hype. These are the stocks that are most susceptible to manipulation; unlike blue chips and other stocks with substantial floats (the number of shares available to b e bought and sold), the price of low-volume stocks can be moved through relatively small strategic trades. This is why online hype usually involves previously unknown securities, often for companies involved in mining or the world of high-tech. Even if a stock that is being hyped starts to move up, proceed with extreme caution, since this may just be part of the overall manipulation scheme. You could still end up holding the bag! Always take the time to do your own research using reputable print and database resources.
Don't act on the advice of a person who hides his or her identity. Keep in mind that many computer bulletin board services allow people to use aliases and nicknames. As a result, you may end up dealing with an undisclosed broker, investor or company insider intent on driving up the price of a stock through false information or baseless speculation that is difficult or impossible to disprove. Don't assume that two (or more) people talking up a stock are actually two (or more) different peopl e!
Don't get suckered by claims made about "inside information," including pending news releases, contract announcements and products.Investment bulletin boards and discussion groups are crammed with hot tips about impending developments sure to send a stock soaring in value. Just because these tips appear in cyberspace does not mean that they are exempt from federal insider trading laws and rules. It is extremely unlikely that genuine "insider information" is going to be publicly broadcast on a investment bulletin board.
Don't assume that just because someone says that they have checked something out that they have done so. Online stock hypesters make all sorts of claims about visiting companies,inspecting mining operations, and having personal conversations with co mpany officials. Keep in mind that you may not be able to verify who is making these claims ... much less whether any of the information is true or the supposed research ever took place. On a related note, keep in mind that an established tactic of inve stment schemers is to talk up mines and factories in remote comers of the U.S. (or elsewhere around the globe) where it is impossible for you to either visit in person or get meaningful information.
Don't forget to always be on the look-out for conflicts of interest. A growing number of those who analyze stocks online are receiving cash or stocks in exchange for making glowing comments about the companies in question. Some of these in dividuals prominently disclose this fact, while others make little or no mention of the fact that they are paid touts. Make sure that you always know why someone is so "high" on an investment opportunity!
Don't just be a "lurker." In the slang of cyberspace, a "lurker is someone who reads messages posted on bulletin boards and listens in on discussion groups, but does not participate directly. Most investment schemes promoted online appear on the surface to involve just those people who are posting messages, but the reality is that the eight out of 10(or more) people who 'lurk" rather than participate are the real audience for what are often staged conversations designed to excite the unsus pecting about the prospects for a stock.You may think that you are listening in on a private conversation, but the people who post messages in an investment scheme know that you are out there ... and they want you to read their messages. This "keyhole illusion' often convinces lurkers that they are privy to genuinely "inside dope." Don't think you are safe from cyberfraud just because you don't speak up online!
Don't forget to make sure first that an investment opportunity and the person promoting it are properly registered with your state securities agency. Laws designed to protect small investors from fraud and abuse do apply in cyberspace. A fai lure by an issuer or broker to follow the state requirements here is often a major 'red flag" of an investment scam. If you do not know how to reach your state securities agency, call NASAA at (202) 737-0900.
THE TEXAS STATE SECURITIES BOARD
The State Securities Board, under the authority of the Texa Securities Act, regulates the offer for sale and sale of securities in Texas. The regulation of securities is designed to foster full and fair disclosure, promote investor protection, and fa cilitate the integrity and efficiency of capital markets.
The operations of the Agency are under the direction of a three member board appointed by the Governor with the advice and consent of the Texas Senate. Board members serve six-year staggered terms. The Board appoints a Securities Commissioner who ser ves at the pleasure of the
Board and who supervises the administration of the Act. Agency employees work under the direction of the Commissioner. The bulk of these employees work in Austin, however, the Agency also maintains enforcement offices in Corpu s Christi, Dallas, Houston and Lubbock.
The Agency's staff is organized into the following functional divisions: the Commissioner's Office,which serves the administrative function; the Securities Registration Division, which processes
applications to register securities for public sale in Texas; the Dealer Registration Division, which processes applications for registration of dealers, agents and investment advisers and conducts
dealer inspections; the Office of the General Counsel, which provides legal advice; the Enforcement Division, which serves to detect and prevent violations of the Act; and the Staff Services Division,
which provides accounting and other support functions.
FOR MORE INFORMATION CALL: 512-305-8300
OR WRITE:
The Texas State Securities Board
P.O. Box 13167
Austin, Texas 78711-3167
ssb.state.tx.us |
