The internet has brought millions of people together in communication and has impacted the financial world significantly with the Dot.com boom and then the Dot.bomb catastrophe. Although much of the internet company fluctuation has come to an end, the internet has offered a new method by which to control a stock portfolio – and this change has also impacted the financial word in a different way. More than half of the stock and securities trading is now conducted online and this has led to cutthroat competition and huge rate drops by online brokers. There is a buyer beware message in all of this though – and that is that Internet Securities Fraud is running rampant throughout the industry and online.
Although the internet offer obvious benefits like constant access to information and the ability to self manage many of your investments, it has actually created more opportunities for nefarious brokers to take advantage of unsuspecting investors. These fraudulent brokers find people through chat rooms, investing bulletin boards and email and they are having a field day because they have access to millions of people – far more than they ever could have reached before.
In many instances, they create a false buzz in the marketplace by posting tips that seem like an inside “scoop’ and this leads people to invest in various securities. Because of their high acumen for manipulation they can orchestrate massive “buys” and “sells” from their own computer and make a huge profit while the investors come out with the short end of the stick. This is often referred to as a “pump and dump” scam because they convince people to buy, which “pumps” up the value of a stock or security and then they rapidly “dump” their interest with a tidy profit. Because the stocks or securities were nothing special to begin with, the investors are out money.
Pyramid scams are also very popular online where someone will convince you to buy in to a stock or security and then convince you to get your friends to do the same. As the scheme grows, your initial trust is secured as you see your investment grow. Ultimately the con artist at the center pulls the plug and the whole thing topples leaving you in a position with less money and where you have adversely impacted others.
You can avoid internet securities fraud by taking some basic precautions. First, do your due diligence and completely research securities opportunities before you put your money into them. Don’t even invest in anything based purely on information you have gotten online and avoid putting your money into any companies, stocks or securities that don’t regularly report to the SEC. By being a savvy internet stock information user, you can reap the benefits of the internet and all the information you can get your hands on without falling prey to a scam and losing your money.
If you have been a victim of internet securities fraud you can contact the SEC directly and you should think about speaking to a qualified attorney who can help you bring your claim to the proper channels.