Berlin based DR. Schulte and Partner Rechtsanwälte mbB concentrate on assisting our clients preventing internet scams. The ever-growing online community embraces possibilities – and forgets to take care Finding the correct way is vital to successfully pursuing claims.

Internet Scams

The Internet is a useful way to reach a mass audience without spending a lot of time or money. A website, online message, or „spam“ e-mails can reach large numbers with minimum effort. It’s easy for fraudsters to make their messages look real and credible and sometimes hard for investors to tell the difference between fact and fiction. That’s why you should think twice before you invest your money in any opportunity you find online.

Here are some of the ways investors can be tricked online:

Online Investment Newsletters

While legitimate online newsletters may contain valuable information, others are tools for fraud.
Some companies pay online newsletters to „tout“ or recommend their stocks. Touting isn’t illegal as long as the newsletters disclose who paid them, how much they’re getting paid, and the form of the payment, usually cash or stock. But fraudsters often lie about the payments they receive and their track records in recommending stocks.

Fraudulent promoters may claim to offer independent, unbiased recommendations in newsletters when they stand to profit from convincing others to buy or sell certain stocks. They may spread false information to promote worthless stocks. To learn more, read our tips for checking out newsletters.

Online Bulletin Boards

Online bulletin boards are a way for investors to share information. While some messages may be true, many turn out to be bogus – or even scams. Fraudsters may use online discussions to pump up a company or pretend to reveal „inside“ information about upcoming announcements, new products, or lucrative contracts.

You may never know for certain who you’re dealing with, or whether they’re credible, because many sites allow users to hide their identity behind multiple aliases. People claiming to be unbiased observers may actually be insiders, large shareholders, or paid promoters. One person can easily create the illusion of widespread interest in a small, thinly traded stock by posting numerous messages under various aliases.

Pump and Dump Schemes

„Pump and dump“ schemes have two parts. In the first, promoters try to boost the price of a stock with false or misleading statements about the company. Once the stock price has been pumped up, fraudsters move on to the second part, where they seek to profit by selling their own holdings of the stock, dumping shares into the market.

These schemes often occur on the Internet where it is common to see messages urging readers to buy a stock quickly. Often, the promoters will claim to have „inside“ information about a development that will be positive for the stock. After these fraudsters dump their shares and stop hyping the stock, the price typically falls, and investors lose their money.

Pump and dump schemes typically involve little-known microcap companies.

Spam

„Spam“ – junk e-mail – often is used to promote bogus investment schemes or to spread false information about a company. With a bulk e-mail program, spammers can send personalized messages to millions of people at once for much less than the cost of cold calling or traditional mail. Many scams, including advance fee frauds, use spam to reach potential victims.

Fake Seals and Phony Numbers – How Fraudsters Try to Look Legit

It’s a hard, cold fact: fraudsters lie. That’s how they attempt to make money. They lie when they promise you „guaranteed“ high returns with little or no risk. And they lie when they forget to mention that the company or product they’re touting doesn’t exist.

Some fraudsters tell straightforward lies, fabricating facts or making bogus claims. That’s why we encourage investors to do their own independent research and to remember that wonderful, timeless adage: „If it sounds too good to be true, it probably is.“ Other fraudsters salt their stories with grains of truth to give their schemes an air of legitimacy. For many years, the SEC and securities regulators around the globe have been encouraging investors to investigate before they invest – to ask tough questions about their investments and the people who sell them. Taking their cue from us, some fraudsters now pretend to do the same.

One ruse fraudsters use involves assurances that an investment has been registered with the appropriate agency. The fraudsters will purport to give you the agency’s telephone number and invite you to verify for yourself the „authenticity“ of their claims. But even if the agency does exist, the contact information almost certainly will be false. Instead of speaking with an actual government official, you’ll reach the fraudsters or their colleagues – who will give the company, the promoter, or the transaction high marks.

Another trick involves the misuse of a regulator’s seal. The fraudsters copy the official seal or logo from the regulator’s website – or create a bogus seal for a fictitious entity – and then use that seal on documents or web pages to make the deal look legitimate. You should be aware that the SEC – like other state and federal regulators in the U.S. and around the world – does not allow private entities to use its seal. Moreover, the SEC does not „approve“ or „endorse“ any particular securities, issuers, products, services, professional credentials, firms, or individuals.

Kim Oliver Klevenhagen

Über den Autor:

Kim Oliver Klevenhagen ist Rechtsanwalt, Fachanwalt für Bank- und Kapitalmarktrecht und Autor aus Berlin.

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