The U.S. Securities and Exchange Commission (SEC) Wednesday charged two men for running an alleged high-yield investment scheme that used social media to seek investors.
The SEC alleges that Pankaj Srivastava and Nataraj Kavuri violated securities laws with a scheme called Profits Paradise that offered “guaranteed” daily profits through trading in foreign exchange, stocks and commodities. The SEC says that they promoted the scheme through a website and YouTube videos detailing three investment plans promising daily returns. They also used Facebook, Twitter and Google Plus to promote the scheme; and, it says, they used fake names to hide their true identities. The allegations against them have not been proven.
“Srivastava and Kavuri used excessive secrecy in their effort to swindle investors through social media outreach and a website that attracted as many as 4,000 visitors per day,” said Stephen Cohen, associate director of the SEC’s division of enforcement. “Our investigation stopped the constant solicitations once the website disappeared, and successfully tracked down the identities of the perpetrators behind those fraudulent solicitations.”
The SEC notes that it received assistance from the Ontario Securities Commission (OSC), Quebec’s Autorité des Marchés Financiers (AMF), the Securities and Futures Commission in Hong Kong, and Securities and Exchange Board of India in its investigation.
Along with the charges, the SEC also issued an updated investor alert warning investors about the use of social media to promote high-yield investment programs and other fraudulent investment schemes. “While social media can provide many benefits for investors, it also presents opportunities for fraudsters,” the alert notes.
“Social media, and the Internet generally, offer a number of attributes criminals may find attractive. Social media lets fraudsters contact many different people at a relatively low cost. It is also easy to create a site, account, email, direct message, or webpage that looks and feels legitimate – and that feeling of legitimacy gives criminals a better chance to convince you to send them your money. Finally, it can be difficult to track down the true account holders that use social media. That potential for anonymity can make it harder for fraudsters to be held accountable,” it says.
“We urge investors to exercise extreme caution if they are approached to invest in a website promising incredible returns with minimal or no risk. So-called high-yield investment programs are often frauds,” said Lori Schock, director of the SEC’s Office of Investor Education and Advocacy.