Intelligence Note

Prepared by the Internet Crime

Complaint Center (IC3 )
Work-At-Home Scams
Consumers need to be vigilant when seeking employment on-line.

The IC3 continues to receive numerous complaints from individuals who have fallen

victim to work-at-home scams.

Victims are often hired to “process payments”, “transfer funds” or “reship products.”

These job scams involve the victims receiving and cashing fraudulent checks, transferring

illegally obtained funds for the criminals, or receiving stolen merchandise and

shipping it to the criminals.

Other victims sign up to be a “mystery shopper”, receiving fraudulent checks with

instructions to cash the checks and wire the funds to “test” a company’s services.

Victims are told they will be compensated with a portion of the merchandise or funds.

Work-at-home schemes attract otherwise innocent individuals, causing them to become

part of criminal schemes without realizing they are engaging in illegal behavior.

Job scams often provide criminals the opportunity to commit identity theft when

victims provide their personal information, sometimes even bank account information

to their potential “employer.” The criminal/employer can then use the victim’s information to open credit cards, post on-line auctions, register Web sites, etc., in the victim’s name to commit additional crimes.

If you have been a victim of Internet crime, please file a complaint at

http://www.IC3.gov.

(Excerpted from the U.S. Dep’t of Justice (DOJ)

“But he that filches from me my good name/Robs me of that which not enriches him/And makes me poor indeed.” - Shakespeare, Othello, act iii. Sc. 3.

The short answer is that identity theft is a crime. Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain. These Web pages are intended to explain why you need to take precautions to protect yourself from identity theft. Unlike your fingerprints, which are unique to you and cannot be given to someone else for their use, your personal data ­ especially your Social Security number, your bank account or credit card number, your telephone calling card number, and other valuable identifying data ­ can be used, if they fall into the wrong hands, to personally profit at your expense. In the United States and Canada, for example, many people have reported that unauthorized persons have taken funds out of their bank or financial accounts, or, in the worst cases, taken over their identities altogether, running up vast debts and committing crimes while using the victims’ names. In many cases, a victim’s losses may include not only out-of-pocket financial losses, but substantial additional financial costs associated with trying to restore his reputation in the community and correcting erroneous information for which the criminal is responsible.

In one notorious case of identity theft, the criminal, a convicted felon, not only incurred more than $100,000 of credit card debt, obtained a federal home loan, and bought homes, motorcycles, and handguns in the victim’s name, but called his victim to taunt him — saying that he could continue to pose as the victim for as long as he wanted because identity theft was not a federal crime at that time — before filing for bankruptcy, also in the victim’s name. While the victim and his wife spent more than four years and more than $15,000 of their own money to restore their credit and reputation, the criminal served a brief sentence for making a false statement to procure a firearm, but made no restitution to his victim for any of the harm he had caused. This case, and others like it, prompted Congress in 1998 to create a new federal offense of identity theft.

What Are The Most Common Ways To Commit Identity Theft Or Fraud?

Many people do not realize how easily criminals can obtain our personal data without having to break into our homes. In public places, for example, criminals may engage in “shoulder surfing” ­ watching you from a nearby location as you punch in your telephone calling card number or credit card number ­ or listen in on your conversation if you give your credit-card number over the telephone to a hotel or rental car company.

Even the area near your home or office may not be secure. Some criminals engage in “dumpster diving” ­ going through your garbage cans or a communal dumpster or trash bin — to obtain copies of your checks, credit card or bank statements, or other records that typically bear your name, address, and even your telephone number. These types of records make it easier for criminals to get control over accounts in your name and assume your identity.

If you receive applications for “pre-approved” credit cards in the mail, but discard them without tearing up the enclosed materials, criminals may retrieve them and try to activate the cards for their use without your knowledge. (Some credit card companies, when sending credit cards, have adopted security measures that allow a card recipient to activate the card only from his or her home telephone number but this is not yet a universal practice.) Also, if your mail is delivered to a place where others have ready access to it, criminals may simply intercept and redirect your mail to another location.

In recent years, the Internet has become an appealing place for criminals to obtain identifying data, such as passwords or even banking information. In their haste to explore the exciting features of the Internet, many people respond to “spam” ­ unsolicited E-mail ­ that promises them some benefit but requests identifying data, without realizing that in many cases, the requester has no intention of keeping his promise. In some cases, criminals reportedly have used computer technology to obtain large amounts of personal data.

With enough identifying information about an individual, a criminal can take over that individual’s identity to conduct a wide range of crimes: for example, false applications for loans and credit cards, fraudulent withdrawals from bank accounts, fraudulent use of telephone calling cards, or obtaining other goods or privileges which the criminal might be denied if he were to use his real name. If the criminal takes steps to ensure that bills for the falsely obtained credit cards, or bank statements showing the unauthorized withdrawals, are sent to an address other than the victim’s, the victim may not become aware of what is happing until the criminal has already inflicted substantial damage on the victim’s assets, credit, and reputation.

The Internet serves as an excellent tool for investors, allowing them to easily and inexpensively research investment opportunities. But the Internet is also an excellent tool for fraudsters. That’s why you should always think twice before you invest your money in any opportunity you learn about through the Internet.

This alert tells you how to spot different types of Internet fraud, what the SEC is doing to fight Internet investment scams, and how to use the Internet to invest wisely.

Navigating the Frontier: Where the Frauds Are

The Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort, or money. Anyone can reach tens of thousands of people by building an Internet web site, posting a message on an online bulletin board, entering a discussion in a live “chat” room, or sending mass e-mails. It’s easy for fraudsters to make their messages look real and credible. But it’s nearly impossible for investors to tell the difference between fact and fiction.

Online Investment Newsletters

Hundreds of online investment newsletters have appeared on the Internet in recent years. Many offer investors seemingly unbiased information free of charge about featured companies or recommending “stock picks of the month.” While legitimate online newsletters can help investors gather valuable information, some online newsletters are tools for fraud.

Some companies pay the people who write online newsletters cash or securities to “tout” or recommend their stocks. While this isn’t illegal, the federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so. Instead, they’ll lie about the payments they received, their independence, their so-called research, and their track records. Their newsletters masquerade as sources of unbiased information, when in fact they stand to profit handsomely if they convince investors to buy or sell particular stocks.

Some online newsletters falsely claim to independently research the stocks they profile. Others spread false information or promote worthless stocks. The most notorious sometimes “scalp” the stocks they hype, driving up the price of the stock with their baseless recommendations and then selling their own holdings at high prices and high profits. To learn how to separate the good from the bad, read our tips for checking out newsletters.

Bulletin Boards

Online bulletin boards – whether newsgroups, usenet, or web-based bulletin boards – have become an increasingly popular forum for investors to share information. Bulletin boards typically feature “threads” made up of numerous messages on various investment opportunities.

While some messages may be true, many turn out to be bogus – or even scams. Fraudsters often pump up a company or pretend to reveal “inside” information about upcoming announcements, new products, or lucrative contracts.

Also, you never know for certain who you’re dealing with – or whether they’re credible – because many bulletin boards allow users to hide their identity behind multiple aliases. People claiming to be unbiased observers who’ve carefully researched the company may actually be company insiders, large shareholders, or paid promoters. A single person can easily create the illusion of widespread interest in a small, thinly-traded stock by posting a series of messages under various aliases.

E-mail Spams

Because “spam” – junk e-mail – is so cheap and easy to create, fraudsters increasingly use it to find investors for bogus investment schemes or to spread false information about a company. Spam allows the unscrupulous to target many more potential investors than cold calling or mass mailing. Using a bulk e-mail program, spammers can send personalized messages to thousands and even millions of Internet users at a time.

How to Use the Internet to Invest Wisely

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small, thinly-traded company that isn’t well known. And don’t even think about investing on your own in small companies that don’t file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company. For instance, you’ll need to:

• get financial statements from the company and be able to analyze them;
• verify the claims about new product developments or lucrative contracts;
• call every supplier or customer of the company and ask if they really do business with the company; and
• check out the people running the company and find out if they’ve ever made money for investors before.

And it doesn’t stop there. For a more detailed list of questions you’ll need to ask – and have answered – read Ask Questions. And always watch out for tell-tale signs of fraud.

Here’s how you can use the internet to help you invest wisely:

Start With the SEC’s EDGAR Database

The federal securities laws require many public companies to register with the SEC and file annual reports containing audited financial statements. For example, the following companies must file reports with the SEC:

• All U.S. companies with more than 500 investors and $10 million in net assets; and
• All companies that list their securities on The Nasdaq Stock Market or a major national stock exchange such as the New York Stock Exchange.

Anyone can access and download these reports from the SEC’s EDGAR database for free. Before you invest in a company, check to see whether it’s registered with the SEC and read its reports.

But some companies don’t have to register their securities or file reports on EDGAR. For example, companies raising less than $5 million in a 12-month period may be exempt from registering the transaction under a rule known as “Regulation A.” Instead, these companies must file a hard copy of the “offering circular” with the SEC containing financial statements and other information. Also, smaller companies raising less than one million dollars don’t have to register with the SEC, but they must file a “Form D.” Form D is a brief notice which includes the names and addresses of owners and stock promoters, but little other information. If you can’t find a company on EDGAR, call the SEC at (202) 551-8090 to find out if the company filed an offering circular under Regulation A or a Form D. And be sure to request a copy.

The difference between investing in companies that register with the SEC and those that don’t is like the difference between driving on a clear sunny day and driving at night without your headlights. You’re asking for serious losses if you invest in small, thinly-traded companies that aren’t widely known just by following the signs you read on Internet bulletin boards or online newsletters.

Contact Your State Securities Regulators

Don’t stop with the SEC. You should always check with your state securities regulator, which you can find on the website of the North American Securities Administrators Association, to see if they have more information about the company and the people behind it. They can check the Central Registration Depository (CRD) and tell you whether the broker touting the stock or the broker’s firm has a disciplinary history. They can also tell you whether they’ve cleared the offering for sale in your state.

Check with the Financial Industry Regulatory Authority (FINRA)

To check the disciplinary history of the broker or firm that’s touting the stock, use FINRA’s BrokerCheck website, or call FINRA’s BrokerCheck Program hotline at (800) 289-9999.

Online Investment Fraud:
New Medium, Same Old Scam

The types of investment fraud seen online mirror the frauds perpetrated over the phone or through the mail. Remember that fraudsters can use a variety of Internet tools to spread false information, including bulletin boards, online newsletters, spam, or chat (including Internet Relay Chat or Web Page Chat). They can also build a glitzy, sophisticated web page. All of these tools cost very little money and can be found at the fingertips of fraudsters.

Consider all offers with skepticism. Investment frauds usually fit one of the following categories:

The “Pump And Dump” Scam

It’s common to see messages posted online that urge readers to buy a stock quickly or tell you to sell before the price goes down. Often the writers will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by gullible investors. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls and investors lose their money. Fraudsters frequently use this ploy with small, thinly-traded companies because it’s easier to manipulate a stock when there’s little or no information available about the company.

The Pyramid

Be wary of messages that read: “How To Make Big Money From Your Home Computer!!!” One online promoter claimed that investors could “turn $5 into $60,000 in just three to six weeks.” In reality, this program was nothing more than an electronic version of the classic “pyramid” scheme in which participants attempt to make money solely by recruiting new participants into the program.

The “Risk-Free” Fraud

“Exciting, Low-Risk Investment Opportunities” to participate in exotic-sounding investments – such as wireless cable projects, prime bank securities, and eel farms – have been offered through the Internet. But no investment is risk-free. And sometimes the investment products touted do not even exist – they’re merely scams. Be wary of opportunities that promise spectacular profits or “guaranteed” returns. If the deal sounds too good to be true, then it probably is.

Off-shore Frauds

At one time, off-shore schemes targeting U.S. investors cost a great deal of money and were difficult to carry out. Conflicting time zones, differing currencies, and the high costs of international telephone calls and overnight mailings made it difficult for fraudsters to prey on U.S. residents. But the Internet has removed those obstacles. Be extra careful when considering any investment opportunity that comes from another country, because it’s difficult for U.S. law enforcement agencies to investigate and prosecute foreign frauds.

The SEC Is Tracking Fraud

The SEC actively investigates allegations of Internet investment fraud and, in many cases, has taken quick action to stop scams. We’ve also coordinated with federal and state criminal authorities to put Internet fraudsters in jail. Here’s a sampling of recent cases in which the SEC took action to fight Internet fraud:

For More Info Go To: http://www.sec.gov/investor/pubs/cyberfraud.htm

The Internet serves as an excellent tool for investors, allowing them to easily and inexpensively research investment opportunities. But the Internet is also an excellent tool for fraudsters. That’s why you should always think twice before you invest your money in any opportunity you learn about through the Internet.

This alert tells you how to spot different types of Internet fraud, what the SEC is doing to fight Internet investment scams, and how to use the Internet to invest wisely.

Navigating the Frontier: Where the Frauds Are

The Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort, or money. Anyone can reach tens of thousands of people by building an Internet web site, posting a message on an online bulletin board, entering a discussion in a live “chat” room, or sending mass e-mails. It’s easy for fraudsters to make their messages look real and credible. But it’s nearly impossible for investors to tell the difference between fact and fiction.

Online Investment Newsletters

Hundreds of online investment newsletters have appeared on the Internet in recent years. Many offer investors seemingly unbiased information free of charge about featured companies or recommending “stock picks of the month.” While legitimate online newsletters can help investors gather valuable information, some online newsletters are tools for fraud.

Some companies pay the people who write online newsletters cash or securities to “tout” or recommend their stocks. While this isn’t illegal, the federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so. Instead, they’ll lie about the payments they received, their independence, their so-called research, and their track records. Their newsletters masquerade as sources of unbiased information, when in fact they stand to profit handsomely if they convince investors to buy or sell particular stocks.

Some online newsletters falsely claim to independently research the stocks they profile. Others spread false information or promote worthless stocks. The most notorious sometimes “scalp” the stocks they hype, driving up the price of the stock with their baseless recommendations and then selling their own holdings at high prices and high profits. To learn how to separate the good from the bad, read our tips for checking out newsletters.

Bulletin Boards

Online bulletin boards – whether newsgroups, usenet, or web-based bulletin boards – have become an increasingly popular forum for investors to share information. Bulletin boards typically feature “threads” made up of numerous messages on various investment opportunities.

While some messages may be true, many turn out to be bogus – or even scams. Fraudsters often pump up a company or pretend to reveal “inside” information about upcoming announcements, new products, or lucrative contracts.

Also, you never know for certain who you’re dealing with – or whether they’re credible – because many bulletin boards allow users to hide their identity behind multiple aliases. People claiming to be unbiased observers who’ve carefully researched the company may actually be company insiders, large shareholders, or paid promoters. A single person can easily create the illusion of widespread interest in a small, thinly-traded stock by posting a series of messages under various aliases.

E-mail Spams

Because “spam” – junk e-mail – is so cheap and easy to create, fraudsters increasingly use it to find investors for bogus investment schemes or to spread false information about a company. Spam allows the unscrupulous to target many more potential investors than cold calling or mass mailing. Using a bulk e-mail program, spammers can send personalized messages to thousands and even millions of Internet users at a time.

How to Use the Internet to Invest Wisely

If you want to invest wisely and steer clear of frauds, you must get the facts. Never, ever, make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small, thinly-traded company that isn’t well known. And don’t even think about investing on your own in small companies that don’t file regular reports with the SEC, unless you are willing to investigate each company thoroughly and to check the truth of every statement about the company. For instance, you’ll need to:

• get financial statements from the company and be able to analyze them;
• verify the claims about new product developments or lucrative contracts;
• call every supplier or customer of the company and ask if they really do business with the company; and
• check out the people running the company and find out if they’ve ever made money for investors before.

And it doesn’t stop there. For a more detailed list of questions you’ll need to ask – and have answered – read Ask Questions. And always watch out for tell-tale signs of fraud.

Here’s how you can use the internet to help you invest wisely:

Start With the SEC’s EDGAR Database

The federal securities laws require many public companies to register with the SEC and file annual reports containing audited financial statements. For example, the following companies must file reports with the SEC:

• All U.S. companies with more than 500 investors and $10 million in net assets; and
• All companies that list their securities on The Nasdaq Stock Market or a major national stock exchange such as the New York Stock Exchange.

Anyone can access and download these reports from the SEC’s EDGAR database for free. Before you invest in a company, check to see whether it’s registered with the SEC and read its reports.

But some companies don’t have to register their securities or file reports on EDGAR. For example, companies raising less than $5 million in a 12-month period may be exempt from registering the transaction under a rule known as “Regulation A.” Instead, these companies must file a hard copy of the “offering circular” with the SEC containing financial statements and other information. Also, smaller companies raising less than one million dollars don’t have to register with the SEC, but they must file a “Form D.” Form D is a brief notice which includes the names and addresses of owners and stock promoters, but little other information. If you can’t find a company on EDGAR, call the SEC at (202) 551-8090 to find out if the company filed an offering circular under Regulation A or a Form D. And be sure to request a copy.

The difference between investing in companies that register with the SEC and those that don’t is like the difference between driving on a clear sunny day and driving at night without your headlights. You’re asking for serious losses if you invest in small, thinly-traded companies that aren’t widely known just by following the signs you read on Internet bulletin boards or online newsletters.

Contact Your State Securities Regulators

Don’t stop with the SEC. You should always check with your state securities regulator, which you can find on the website of the North American Securities Administrators Association, to see if they have more information about the company and the people behind it. They can check the Central Registration Depository (CRD) and tell you whether the broker touting the stock or the broker’s firm has a disciplinary history. They can also tell you whether they’ve cleared the offering for sale in your state.

Check with the Financial Industry Regulatory Authority (FINRA)

To check the disciplinary history of the broker or firm that’s touting the stock, use FINRA’s BrokerCheck website, or call FINRA’s BrokerCheck Program hotline at (800) 289-9999.

Online Investment Fraud:
New Medium, Same Old Scam

The types of investment fraud seen online mirror the frauds perpetrated over the phone or through the mail. Remember that fraudsters can use a variety of Internet tools to spread false information, including bulletin boards, online newsletters, spam, or chat (including Internet Relay Chat or Web Page Chat). They can also build a glitzy, sophisticated web page. All of these tools cost very little money and can be found at the fingertips of fraudsters.

Consider all offers with skepticism. Investment frauds usually fit one of the following categories:

The “Pump And Dump” Scam

It’s common to see messages posted online that urge readers to buy a stock quickly or tell you to sell before the price goes down. Often the writers will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by gullible investors. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls and investors lose their money. Fraudsters frequently use this ploy with small, thinly-traded companies because it’s easier to manipulate a stock when there’s little or no information available about the company.

The Pyramid

Be wary of messages that read: “How To Make Big Money From Your Home Computer!!!” One online promoter claimed that investors could “turn $5 into $60,000 in just three to six weeks.” In reality, this program was nothing more than an electronic version of the classic “pyramid” scheme in which participants attempt to make money solely by recruiting new participants into the program.

The “Risk-Free” Fraud

“Exciting, Low-Risk Investment Opportunities” to participate in exotic-sounding investments – such as wireless cable projects, prime bank securities, and eel farms – have been offered through the Internet. But no investment is risk-free. And sometimes the investment products touted do not even exist – they’re merely scams. Be wary of opportunities that promise spectacular profits or “guaranteed” returns. If the deal sounds too good to be true, then it probably is.

Off-shore Frauds

At one time, off-shore schemes targeting U.S. investors cost a great deal of money and were difficult to carry out. Conflicting time zones, differing currencies, and the high costs of international telephone calls and overnight mailings made it difficult for fraudsters to prey on U.S. residents. But the Internet has removed those obstacles. Be extra careful when considering any investment opportunity that comes from another country, because it’s difficult for U.S. law enforcement agencies to investigate and prosecute foreign frauds.

The SEC Is Tracking Fraud

The SEC actively investigates allegations of Internet investment fraud and, in many cases, has taken quick action to stop scams. We’ve also coordinated with federal and state criminal authorities to put Internet fraudsters in jail. Here’s a sampling of recent cases in which the SEC took action to fight Internet fraud:

For More Info Go To: http://www.sec.gov/investor/pubs/cyberfraud.htm