Internet Fraud

Since the Internet was opened to commercial use in 1995, it has had a tremendous impact on the way business is done worldwide. However, wherever legitimate businesses go, business fraud is sure to follow. The Internet has made our lives much easier, but it’s also made fraud much easier. The Internet is global and anonymous, which allows criminals to hide behind false identities and the laws of foreign countries. If you have a problem, the physical distance and differences in legal systems could make resolving it difficult. It’s so easy to be lured by promises of quick and easy money, or other dreams come true, that many people throw caution to the wind. The best advice for not falling victim to fraud is the same as it’s always been: If it sounds too good to be true, it probably is.

Part of the effectiveness of the Internet is that you can reach millions of people with almost no investment of time and money on your part. Whereas sending out junk mail requires the cost of paper, printing, and postage, sending out email spam to millions of people costs virtually nothing. In a few minutes, anyone can make an official looking website that can be seen by millions of people. Anyone can reach tens of thousands of people by creating a website, posting a message on an online bulletin board, entering a discussion in a live chat room, or sending out email spam. This makes the Internet a particularly effective tool for con artists, by minimizing their investment, and maximizing their audience. Even if a tiny percentage of people take the bait, they still make a profit.

On the Internet, con artists can easily create false identities, and it’s very difficult to find out who a person really is. Keep in mind that they are not necessarily who they say they are. Also, it’s a common for one person to create several false identities. Someone might post messages on bulletin boards advocating a certain stock or investment under many aliases in order to create the illusion of widespread interest in a small thinly-traded stock. Someone could sell bogus products or services on an online auction, and then give themselves positive reviews or positive feedback using several false identities.

Ninety percent of Internet fraud takes place through online auctions such as Ebay. Always remember that most online auctions simply list items that people are trying to sell. The auction website does not verify that the merchandise actually exists or that it is described accurately, and they don’t guarantee that the sellers will keep their promises. The seller may try to raise the price artificially by making bids under fictitious names or recruiting other people to make bids. Since you can’t examine the merchandise or have it appraised until after the sale, don’t assume that claims about its condition or value are true, or that photographs are accurate. Be sure to print and save the description and photographs in order to document the claims that were made. Under federal law, you can dispute the charges if you paid the seller with a credit card and the item was never delivered, or was misrepresented.

We have all seen offers to start your own business, of one kind or another, with promises of quick and enormous profit. These offers are almost always fraudulent. In reality, most small businesses fail, it takes enormous hard work to run our own business, and there is certainly no guarantee that you’ll ever make any profit, or how much profit you will make. The Federal Trade Commission’s Franchise Rule requires franchise and business opportunity sellers to give you detailed written information called the “disclosure document”, at least 10 days before you pay any money or agree to purchase. The written information that sellers must provide includes the names, addresses, and phone numbers of people who have already purchased the franchise. Ask them if their experiences matched what the company promised.

Be very wary of anyone offering to loan you money. Legitimate lenders don’t ask for a fee upfront. If there is an application fee, it would small, not hundreds or even thousands of dollars. If you have a problem with bad credit, your local Consumer Credit Counseling Service can provide advice about how to build up your credit record.

Never make an investment based solely on what you read in an online newsletter or bulletin board posting, especially if the investment involves a small thinly-traded company that isn’t well known.

One of the most famous frauds on the Internet is also one of the most famous frauds in history, going back centuries. At beginning of the 20th Century, it was called the “Spanish Prisoner”. In its latest incarnation, it’s called the “Nigerian scam”, “4-1-9”, after the Nigerian law it violates, or the “Advance Fee Fraud”. There are hundreds of variations on the common theme of claiming that if you pay a small amount of money now, you’ll get a large amount of money later, but of course you never see that phantom fortune, and the “small amount” of money could be several thousand dollars. The con artists send out mass email spam claiming to be some Nigerian dignitary who has millions of dollars locked up in a bank account he can’t access. He then claims that if you pay the bank a couple thousand dollars in fees, then he will gain access to his account, and share the money with you. What’s a couple thousand dollars now if you’ll receive millions of dollars later? Of course, you after you pay the money, you never hear from them again. It’s hard to imagine someone falling for this, especially when you receive Nigerian scam spam every day, but this particular scam results in confirmed losses of over $100 million in the United States every year, and probably more from people too embarrassed to report it.

So the conclusion is just use basic common sense. There have always been and will always be unscrupulous charlatans trying to separate gullible unsuspecting people from their money. Don’t let yourself be one of them. Use the same caution and skepticism on the Internet as you would confronted with junk mail in your mail box, a telemarketer on the phone, or a salesman at your front door. If you do find yourself the victim of Internet fraud, you can contact the following agencies or organizations.

You will find an online complaint for at:

You will find and online complaint form at

The BBB specializes in consumer complaints. It is best to review their complaint policies at

This agency covers a wide variety of frauds. It is best to review their complaint policies at

The SEC specializes in investment fraud. It is best to review their complaint policies at