As the Internet grows, so does the proliferation of online scams. The Security and Exchange Commission (SEC) receives more than a hundred complaints a day about illegal Internet activity. Most of these complaints involve online stock scams and suspicious investment schemes, otherwise known as pump-and-dump scams. In 1998, the National Consumers League received 7,752 Internet fraud complaints, up from less than 2,000 the previous year. And, as in the "offline" world, Web criminals tend to target the most vulnerable, ill-prepared and weak among us.
"These scam artists are waging war," says John Reed Stark, the SEC's chief of the office of Internet enforcement. "They're committing frauds that can ruin lives." In an attempt to educate the surfing public about the various scams currently being perpetrated, a July consumer report entitled The Online Scam, written for PC World by Jeffrey Rothfelder, outlines the top four Internet swindles and what consumers can do to protect themselves.
"For the unscrupulous, nothing is more mouth-watering than an expanding pool of potential victims," writes Rothfelder. "Thousands of new surfers plunge into the Web each week, but the same technology that they find so attractive also makes it simpler for scammers to rook them." The Rothfelder article is an in-depth examination of the current state of Internet fraud.
The following is an abbreviated look at the four most common swindles and some tips for dealing with them:
Online-Auction Fraud \nThe Scam: Illicit online auctions - especially person-to-person. \nRed Flags: Unbelievably cheap prices for desirable items, seller's general evasiveness about providing a contact phone number, lack of response to E-mail queries and promises to get you an item that is not in stock. \nThe Danger: You post the winning bid, send in your check or money order and get nothing in return - or you get an item nothing like the one you ordered. \nRothfelder Tip: Pay attention to an auction site's evaluation system, pay via credit card, or use an escrow agent such as www.escrow.com.
Pump-and-Dump Stock Schemes \nThe Scam: Stock manipulation and promoting. \nRed Flag: Company stocks are hyped (and artificially inflated) out of the blue without background or supporting information. \nThe Danger: Because there's no real value driving the stock price up, you risk a potential loss of the entire investment with little or no chance of recouping it. \nRothfelder Tip: Always demand written information about the company behind the investment; request a prospectus or financial statement.
Multi-level Marketing Schemes \nThe Scam: Pyramid scheme. \nRed Flag: Profit is all from recruitment effort and no real product or service is sold. \nThe Danger: Only approximately 2 percent of investors ever see any profit; all other participants lose everything they've invested. \nRothfelder Tip: If an E-mail offer sounds too good to be true, delete the message and forget it.
Credit Card Schemes \nThe Scam: Cramming - charges for items never ordered. \nRed Flag: Mysterious charges on credit card statements and telephone bills for International products or services never ordered, such as membership with porn sites. \nThe Danger: Initial charges may be insignificant and go unnoticed; victims may have a hard time getting previous charges removed. \nRothfelder Tip: There's not much you can do in advance; however, the Federal Trade Commission (FTC) advises consumers to check all charges and to report any they don't recognize to the FTC and their credit card company immediately.
More information on Internet scams and how to avoid being taken are available at these sites:
Bestfares USA (www.bestfares.com/scam/scam1.htm) \nCredit Infocenter (www.creditinfocenter.com) \nInternet Fraud (www.internetfraudcouncil.org) \nNational Fraud Center (www.nationalfraud.com) \nScamBusters (www.scambusters.com) \nScamWatch (www.scamwatch.com) \nStock Detective.com (www.stockdetective.com)
