Internet Criminals and The Pigeons
by Dr. David Currie

More on Internet Fraud...

Walking into the internet is kind of like being a stranger walking into a little bar on the edge of a strange town at dusk.  "You pays your money and you takes your chances!"  You really have absolutely no idea what you are going to encounter.  I do know this... if you have used your e-mail account in the past 2 years, then you, along with millions of others, have been the object of attempted internet fraud.

A couple of years ago, in a collegial discussion among some of my Internet cronies, we came to the rather inane conclusion that within the next few years, Internet Spammers and Frauders would be eliminated.  In fact, it was a case of "it will get a lot worse before it gets better.  Along with the multitude of fraudulent online ploys that closed out the 20th century, the 21st century was greeted with rapid expansion by online thieves of identity.

At its worst, internet fraud robs people of their life's savings.  At its best, attempted internet fraud is borderline laughable, and we are amazed at the lunacy of many of the "get-rich-quick" Internet schemes.  Nonetheless, this author would estimate that approximately 200-300 Americans fall prey to Internet fraud on a daily basis.  So what is going on in the world of Internet fraud today?

Continue to be wary of the endless string of fraud perpetrated by those selling and buying at the Internet auction sites.  NetNacs warned you nearly a year ago to stay away from the major auction houses, which continue to provide no substantial level of anti-fraud protection for buyers or sellers.  Internet auction sites are essentially warehouses for Internet fraud.  As many as 40%  of persons involved in online auctions continue to be victims of some level of fraudulent activities.  And, depending on which source is correct, fraudulent activities at online auction sites continue to account for 50-90% of online fraud.  While that is a big points spread, it does not speak highly of any of the online auction houses; if fraudulent activities were carried on in a traditional auction house at rates even one-tenth of those at the major online auction sites, the traditional auction houses would be unable to obtain fire insurance.

Online auction fraud used to be pretty simple... it was based on the theory that a pigeon waiting to be plucked is born every minute.  The successful bidder bids for something, generally often bidding more than the item is really worth, sends a bunch of money somewhere, and never gets anything in return... simple.  But things are getting more complex by the day.  Suppose you sell your boat through an online auction.  The winning bid is $5000.  You receive a cashier's check in the mail for $4000.  The buyer comes up with any number of stories.  Their goal is to get you to deposit the cashier's check in your bank account.  Once they do that, they have about 72 hours in which to get you to send them a personal check to reimburse their money.  Generally, within 72 hours, your bank will have found that their cashier's check is no good... and within another 3-5 days, your bank will have tracked you down and notified you (probably by snail mail)... hope you didn't already spend the money!  Remember, the bidder just needs to get you to send them a personal check before your bank notifies you that the cashier's check you received was no good.  The bidder might tell you that they cannot come up with the extra thousand, they might tell you that they decided the boat is just not worth $5000, they might tell you that their spouse is angry because that money was from the kids' college fund.  The crook committing the fraud against you just needs to be quicker than your bank... and that is not too difficult.

Beware the "get-rich-quick" pyramid scheme... also known as the MLM (multi-level marketing scheme).  This is essentially where you work to sign up a bunch of people who pay a couple of hundred dollars in membership fees in the hopes of saving thousands upon thousands of dollars in goods and services.  The fundamental flaw is that the MLM's cannot consistently deliver more than marginal discounts on goods and services... and financial pyramids fall apart quickly when everyone in the pyramid wants to be rich by the end of the business day.  Fortunately, or unfortunately, at some point, people in key positions in the pyramid begin to realize that if you are not at the very top of the pyramid, not only will you not get rich, but you may lose your shirt.  Here, one more cottage industry has developed; the online MLM-related industry.

There are the MLM schemes themselves, the courses, conferences, software and video to teach you how to set up your own borderline illegal pyramid scheme, the sites to prevent you from being defrauded by the MLM schemes, and the sites at which to report fraudulent activity by the MLM schemers.  If you are an active participant in an MLM, whether seller or customer, you may want to check out some of the major MLM schemes thrown in the spotlight by Internet Fraud Watch.  It is almost pathetic to read letters written by people who have been soaked by Internet fraud... often threatening, pleading, cajoling, and begging to get their money back... all to no avail... Internet fraud is difficult to prove, and even harder to prosecute.

If you want to protect yourself against identity theft, a good place to start is Fight Identity Theft . . . A lot of us mistakenly assume that identity theft occurs when someone "hacks" their way into our computer.  In fact, this is rarely the case.  One of the most common methods of identity theft is to send out mass e-mailings informing people that their account information is out of date.  An online site has been set up at which you can conveniently update your personal account information.  Fill in the information, and the crook now has the basic info necessary to obtain additional information, credit cards and even identification in your name... clean and simple.  This author has been receiving e-mails indicating that my account information is not up to date at the rate of about 2 per week... in fact, this morning, I received an e-mail indicating that if I did not update my information, my account would be closed and I would be unable to receive my usual preferential interest rate... oh my!

We all receive those funny letters (and versions of them) telling us about the phenomenally wealthy Nigerian family which has survived the recent civil war in their country only to find that they cannot get their millions upon millions of dollars out of the country unless they can temporarily transfer their money to your bank account.  And, of course, you have been recommended to them by someone in the state department who feels that you are a trustworthy individual who would be willing to help them out by sending them your personal bank account numbers.  Don't worry, the state department gave this poor family 35 million names, and they have e-mailed everyone.  If you think there will not be any takers, you are most likely wrong... remember, a pigeon born every minute.  If you have the same fine discerning tastes in art, you are probably also receiving frequent e-mails asking you if you would like to buy bronze sculptures from Russia.

Also of late, The US Securities and Exchange Commission is warning potential investors about the "fake" investment newsletters sent out touting the value of stocks... pretty simple, you send your money and you don't get your stock... or you send your money and get stock worth a fraction of the money you sent.  Most of the fraudulent investment newsletters are accompanied with a wealth of information about the CEO of the newsletter group, who is a wealthy tycoon (mogul status) with a huge following of the rich and increasingly famous.  Read the straightforward warnings about get-rich-quick stock newsletter schemes directly from the SEC at http://www.sec.gov/investor/pubs/cyberfraud.htm.

Finally, we hope it never happens to you, but if you feel that you are a victim of Internet Fraud, be sure to get in touch with the Internet Fraud Complaint Center.  Chances are, you will never see your money again, but you may help pave the way for someone to make a quick trip to the local jailhouse.

Dr. W. David Currie