(March 2 – 08:45 ET) – Yesterday, the U.S. Securities and Exchange Commission cracked down on Internet securities fraud again with its fifth nationwide Internet fraud sweep. The campaign has resulted in 11 enforcement actions against 23 companies and individuals.

The SEC says the alleged perpetrators used the Internet to pump the market capitalization of the stocks involved by more than US$300 million and raise US$2.5 million in proceeds from investors in the U.S. and abroad. The frauds were accomplished by a variety of online means, including spam e-mails, electronic newsletters, Web sites, hyperlinks, message boards and other Internet media.

SEC director of Enforcement Richard Walker said, “Today’s cases are a sobering reminder for investors that, on the Internet, there is no clearly defined border between reliable and unreliable information. Therefore, investors must exercise extreme caution when they receive investment pitches online.”

“These actions involve a virtual checklist of common securities fraud techniques,” Walker added. “Perpetrators lured investors with promises of fast and easy profits in thinly-traded, or even privately-held, development stage companies that operate in ‘hot button’ industries.”

One private company used spam e-mail and a Website to announce its upcoming IPO, which never happened. Another company issued a press release claiming it would “quickly reach a significant market share in the $400+ million” study aids market, although its internal projections anticipated it would take at least one year for the company to reach a 5% market share of the $160 million study aids market.

A former roofer, Ricky Laine Gaspard, claimed to be a market expert despite limited trading experience and a trading system bought over the Internet. Outrageous stock-picking boasts, and purportedly independent research coverage paid for by the issuer were the other techniques used.

The SEC has now brought more than 200 Internet-related enforcement actions, nearly half of them in the last 14 months.
-IE Staff