Feeds

SEC in Internet fraud crackdown

Investors' money used for lap dancing, gambling and flash cars

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

The founder of an "online eyeware" company used money from investors to finance trips to casinos and topless bars, according to a lawsuit filed by the Securities and Exchange Commission (SEC).

Chidwhite Enterprises, founded by Jerry Chidster, is one of 23 companies and individuals charged by the SEC of using the Internet to defraud investors of $2.5 million and "pumping up" the market value of stocks by $300 million.

The frauds were accomplished by a variety of online means, including "spam" emails, electronic newsletters, Web sites, hyperlinks, message boards and other Internet media. Half all the cases by the SEC have been in the last 14 months, indicating fraud is on the increase.

Perhaps the worse case identified by the SEC in its annual Internet fraud sweep is that of Chidwhite which used spam email and a Web site to announce that a flotation of its "$1 billion online eyewear business" was imminent. These claims brought in $96,000 from naive investors paying $10 for so-called "free stock credits" which, it is alleged, actually went on financing Chidster's playboy lifestyle.

According to the SEC, Chidwhite never received approval for an IPO, the company had no offices, no inventory, and no products or services. The perfect "virtual company" then.

In another case, principals of Internet-firm Smart-Mart allegedly used a "large portion" of 32.4 million in investor funds for unauthorised business and personal expenses, including buying cars, exotic holidays and home mortgage payments. It all seems like a throwback to a forgotten era.

A full list of scams unearthed by the SEC is available here and it makes interesting reading. We particularly liked the tale of a former roofer turned "online expert stock analyst" that claimed he had a proprietary computer trading system, and issued a false resume to this effect.

The SEC has provided a list of helpful advice on how people might avoid scams online, to which we'd like to add our own advise that people need to use more commonsense. If a deal is too good to be true it almost certainly isn't true.

Related stories

E-commerce is a hotbed of fraud
400 pound ex-coke dealer CEO ousted after media blitz
FBI fights fraud in cyberspace
FTC grounds man in online fraud case

External links

SEC press release on Internet fraud crackdown
SEC tips on how avoid being conned by fraudsters

Internet Security Threat Report 2014

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
DOUBLE BONK: Testy fanbois catch Apple Pay picking pockets
Users wail as tapcash transactions are duplicated
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
YARR! Pirates walk the plank: DMCA magnets sink in Google results
Spaffing copyrighted stuff over the web? No search ranking for you
In the next four weeks, 100 people will decide the future of the web
While America tucks into Thanksgiving turkey, the world will be taking over the net
Microsoft EU warns: If you have ties to the US, Feds can get your data
European corps can't afford to get complacent while American Big Biz battles Uncle Sam
prev story

Whitepapers

Choosing cloud Backup services
Demystify how you can address your data protection needs in your small- to medium-sized business and select the best online backup service to meet your needs.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.