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Effective December 31, 2012, articles are no longer being updated on this web site.
The site is now maintained as an historical archive, covering articles from the period 1999 to 2012.


FRAUD, THE NET'S KILLER APP

Source: Business 2.0

Posted on January 30, 2001

      Recently, a colleague and I were musing about things for which the Internet is really good -- viral marketing, research, shopping, and email to name a few. But I think we made one glaring omission--fraud. The Internet is the best tool to land on grifters since Charles Ponzi invented the pyramid scheme. And although dot-coms are failing and the Internet has lost its new new thing glow, rip-off artists continue to wield the Web's awesome reach to perpetrate their scams.

      Last Friday, a federal grand jury in South Carolina indicted two people for selling bogus luxury goods over the Internet. Not that they tried to conceal their activities. Under the company name Fakegifts.com, and the tagline "Where image is everything," they sell "replicas" of Coach handbags for $80, Mont Blanc pens for $19.99, and Rolex watches for $129.

      Not to be outdone, stock swindlers continue to use the Internet despite the Security and Exchange Commission's recent crackdown. A few weeks ago, the Feds busted an outfit called Web Hosting Headquarters that promised more than 130 investors it was a hot new prospect. But in reality, say the authorities, the company conducts "minimal legitimate business activities." Its two founders reportedly possess rap sheets full of prior fraud violations and along with other principals allegedly pocketed nearly two-thirds of the $2.5 million they raised.

      It's easy to be amused at such "victimless" skullduggery when you're not the one stung. But grifters often target companies and individual investors. In the course of a four-month long investigation of Internet-based stock fraud for this magazine, I spoke with several CEOs who have had to take legal action against scam artists who were spreading false information about their companies to short their stocks. Just because dot-com mania is over doesn't mean the swindlers have retired. Be vigilant, the fraudsters are out there.

By Edward Robinson, senior writer for Business 2.0.




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