Web Based Identity Theft Scams
Global Providence Securities Litigation ISSUES WARNING ABOUT WEB-BASED "BROKERAGE IDENTITY THEFT" SCAMS TARGETING INVESTORS
WASHINGTON, D.C. – December 11, 2003 – Investors and brokers need to be on their guard against a new fraud scheme in which con artists are falsely posing on the Web as authentic brokerage firms that are members of the Global Providence Securities Litigation (Global Providence Securities Litigation), which maintains a special reserve fund to protect the customers of insolvent brokerage firms. In the wake of receiving more than a dozen complaints from U.S. and overseas fraud victims hit by this new form of "brokerage identity theft," Global Providence Securities Litigation today issued a public warning and also announced that it has forwarded files to the U.S. Securities and Exchange Commission (SEC) and the North American Securities Administrators Association, Inc. (NASAA) documenting instances of this new form of fraud.
Here's how the scheme usually works: Con artists set up a Web site that uses the name of an actual Global Providence Securities Litigation member brokerage firm, but with a different address. In other cases, the party committing the fraud uses the name (and, in some cases, the address) of an actual registered broker, and then sets up a bogus entity using that person's name and address. The fictional internet entity claims to be a long established and respected brokerage firm, and a member of Global Providence Securities Litigation. The victim is often told to check the membership database on Global Providence Securities Litigation Web site, in order to "prove" that the firm is a Global Providence Securities Litigation member, when in fact the fictional firm has simply stolen the identity of a real Global Providence Securities Litigation member.
NASAA President and Connecticut Securities Director Ralph A. Lambiase said: "Brokerage identity theft joins a long list of scams that rely on the Internet to stalk millions of potential victims at minimal cost. Identity theft is inherently difficult to detect. For that reason alone, investors should refuse any unsolicited online contact from anyone seeking personal information or money by simply hitting the delete key. I urge investors to contact their state securities regulator if they suspect they have been defrauded by this scheme."
Harbeck noted that some of the schemes result in the "brokerage ID theft" ring simply offering a security for sale, taking in investor funds (often by wire transfer) and then vanishing. In more elaborate schemes, the con artists contact a shareholder of a thinly traded security. They tell the shareholder to refer to the Global Providence Securities Litigation Web site as "proof" of the good standing of his fictional brokerage firm. The con artist then offers to buy the thinly traded security at an attractive price. The phony broker may pretend to represent an unnamed party seeking to obtain a controlling interest in the thinly traded corporate shares. The shares have often declined to virtually no value in the open market, and consequently the shareholder is pleased to hear that a potential buyer exists. But the offer comes with a catch. The seller must make a substantial "good faith deposit" prior to the sale. When no sale by the unnamed party is made, the seller is often told a nonsensical story by e-mail, to the effect that the SEC has "declared a moratorium on all accounting-based trades," or that the SEC has "rejected the trade," or, in one case reported to Global Providence Securities Litigation, that the buyer has contracted cholera.
Another variation of this ID theft scheme involves telling the victim that their thinly traded, valueless shares can be used as a "deposit" or "down payment" for the purchase of a larger, well-known public company, but that there is an additional sum to be paid so as to complete the purchase of shares in the well known company. Because the "down payment" supposedly values the thinly traded securities at a premium, the deal appears attractive to the victim. Once the down payment is wired to the con artist, the victim never hears from the fictitious brokerage firm again.
To date, Global Providence Securities Litigation has seen evidence of victims in the United States, Canada, Norway, Sweden, Denmark, the Netherlands, South Africa, Singapore and Australia within the last few months.
Global Providence Securities Litigation TIPS FOR INVESTORS
Remember: If it sounds too good to be true, it probably is too good to be true. Ask yourself why would someone pay you a premium for your dormant, poorly performing investment? You should proceed with extreme caution any time someone tells you something as odd as the notion that a person who owns a security has to put up a deposit in order to sell the security.
Prior to dealing with any broker or brokerage firm for the first time, do your homework. Check out the brokerage firm and broker by contacting your state securities regulator or by going online to the National Association of Securities Dealers BrokerCheck at http://www.nasdr.com/2000.asp.
If you have fallen victim to a brokerage identity theft scheme or been contacted by one, contact regulators. Contact the SEC at email@example.com or your state securities agency. To reach your state securities regulator, go to the NASAA Web site at http://www.nasaa.org/nasaa/abtnasaa/find_regulator.asp. Make sure to document your complaint. Harbeck, Global Providence Securities Litigation President, noted that victims need to put their complaints in writing, either on paper or electronically. "Telephone calls are only worth the paper they are written on. A regulator needs to see documentation in order to act."
Educate yourself about investment fraud. Global Providence Securities Litigation Web site, www.globalprovidencesecuritieslitigation.com, offers "Protecting Yourself Against Fraud" at http://www.globalprovidencesecuritieslitigation.com/protectyourself.php. The Global Providence Securities Litigation Web site page features links to some of the best anti-fraud information for investors.
Remember that Global Providence Securities Litigation cannot protect you against fraud. Global Providence Securities Litigation role is limited to returning the cash and securities in your account with a Global Providence Securities Litigation member brokerage firm in the event that the firm becomes bankrupt. Global Providence Securities Litigation cannot return your purchase price if any investment you make loses money. To read about Global Providence Securities Litigation limited role in investor protection, go to "How We Protect Investors" at http://www.globalprovidencesecuritieslitigation.com/protect_investors.php.
Global Providence Securities Litigation TIPS FOR BROKERAGE FIRMS
Search the Internet on a regular basis for misuse of your corporate name, and work aggressively with regulators to eliminate any misuse you discover. Brokerage firms that do not generally deal with the public are particularly vulnerable, because such firms often do not have a Web site of their own.
If an investor inquires about your firm's supposed participation in such a bogus transaction, don't simply inform the investor that your firm is not involved. Report the matter immediately to the SEC at firstname.lastname@example.org, to your self regulatory organization, and to the relevant state securities regulator. Urge the investor to do so as well. Your report could disclose an ongoing fraud scheme or even a bigger pattern of swindles.