Internet scams: Something new. Not!
In almost any social gathering the topic of conversation eventually drifts toward the question “.and what do you do?” When we answer “ we are financial investigators” the response for the last three years has been “Have you seen that new Internet scam?” Before the Internet, the response was more or less evenly split between embezzling school boards and Nigerians. We almost miss those days!
The real truth is that we have seen no scam on the Internet that wasn’t going on long before the Internet was invented as a DARPA project in 1969 – or, as some would have it, by Al Gore.
“The Internet is now a favorite haven for con-artists” according to a senior SEC official. These so-called cyber-scams fall into three categories: False or misleading statements in offerings of securities, pyramid schemes, and pump and dump.
The false or misleading statements involve selling something that isn’t there or overstating your position, such as a mining company with no ore, or a manufacturing company with no plant. These have been around since, well man sold stocks and opportunities. And treasure maps.
The “guaranteed credit card” is a good example. All you have to do is pay a processing fee of $50.00 to receive your card. The processing fee jumps to $150.00 for offshore credit cards. A fellow by the name of Travis was doing the offshore credit card scam before the Internet, and was making about $150,000 per year. Sadly, the mailing and printing costs were chewing him up although making a lot of printers and mailing houses richer. When he switched to the Internet and SPAMed across the world he was making about $90,000 per month. Though he did have to switch ISPs often, he eventually made enough to set up his own ISP. The last any one saw of Travis was at a motel in Austin with his, uh, secretary, and $280,000 in cash. While this was an old scam, the reduced costs of contact on the Internet made it more profitable.
Pyramid schemes have been around since there were con men. Some historians of crime have been able to trace pyramid schemes back to the late 1300’s in Genoa. This is not to say that they were invented then, merely that they have been able to document their existence from local court records. As for “pump and dump,” the practice of pushing up the price of stock with new releases goes back to the orient and East India trading companies in Europe and Asia, the Western Land Boom in the United States just after independence in the late 1700’s, and Joe Kennedy and his contemporaries in the 20’s and 30’s.
The point here is that there is nothing really new with Internet scams. They are the same scams that have been around for a very long time. The Internet just allows cheaper access to more and more willing victims.