On line schemes
On line schemesOn line Schemes
Cyberspace was once a place inhabited largely by government agencies and academics linked together through a decentralized collection of computer networks that came to be known as the "Internet." The late 1980s and early 1990s gave birth to a torrent of commercial entrants into cyberspace, with the way led by Compuserve and then Prodigy and America Online. By the end of this year, an estimated four million American households will be online with these commercial services, which are the three largest such enterprises in the U.S. Additionally, hundreds of smaller companies have emerged to provide bulletin board services and local access to the world of Internet.1
The number of Americans who are online has jumped 90 percent since 1992 alone, their ranks are expected to double or triple over the next two to three years.2 According to Whole Earth Review, America Online more than doubled in size in a nine-month period, going from 300,000 users to over 700,000.3 The New York Times, has described the Internet as the world's "new mass information market."4
Today investors are in danger of being taken for a ride on the cyberspace. State securities regulators around the U.S. are concerned about the explosion of illicit investment schemes now flourishing on commercial bulletin board services and the informal web of computer networks that make up the Internet. An estimated four million U.S. households that already have access to the major online services are being exposed to hundreds of fraudulent and abusive investment schemes, including stock manipulations, pyramid scams and Ponzi schemes.5
The online frontiers are aware of some of the major rip-off techniques now in use. According to Fighting Computer Crime, the investment fraud problem could reach epidemic levels over the next few years as several million unsophisticated newcomers crowd onto the once lightly traveled information superhighway.6 On the other hand, cyberspace can also educate investors, helping them to become much better investors.
For those who have been online, know that most sites has been commercialized by bulletin boards and discussion groups devoted to investment tips, advice and solicitations. According to one regulatory agency's count, more than 5,600 new messages on investment topics were posted in 969 different topic areas featured on the Prodigy service during a recent two-week period.7 Many of the investment specific messages now appearing on commercial services and the Internet openly hawk brokers, investment advisers, financial newsletters, and specific investment deals. Though many of the messages simply offer general stock-picking advice, investment possibilities, tips on specific stocks, moneymaking enterprises and service providers.
The Missouri Securities Division and the New Jersey Bureau of Securities announced on June 30, 1994 the first regulatory actions taken in the U.S. against online investment schemes. At least three other states currently have investigations underway into lying suspected investment fraud and abuse in cyberspace.
Investors were told "how to make big...
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