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more_legal_areas stock_fraudWhile many investors have found the Internet to be an excellent research tool, Internet stock fraud has also caused concerns regarding the reliability of information posted to the Internet. The main difference between traditional forms of stock fraud and Internet stock fraud is that by using the Internet, fraudsters can quickly and inexpensively reach a very larger number of people while easily concealing their identities. The methods used in most Internet stock fraud schemes are the same as in more traditional stock fraud, which relies upon telephones and/or the mail to reach investors. The good news is that Internet stock fraud is taken very seriously by the federal government and other regulatory agencies, and investors who take the time to educate themselves about Internet stock frauds can avoid being taken advantage of.
There are various tools available that persons committing Internet stock fraud rely upon. Message boards, mass emails, online newsletters and web sites allow fraudsters to reach and enormous number of potential investors. The main aspect of the Internet that lends itself to the commission of Internet stock fraud is the relative anonymity that users of the Internet enjoy. It can be very difficult to determine the true identity of a person or group that is committing Internet stock fraud.
Using message boards, a single person can post under a number of different aliases to create the appearance of widespread interest in a certain stock. Another method used on message boards to commit Internet stock fraud is to claim to have "insider information" about upcoming company announcements such as new products or lucrative contracts. It can be close to impossible to confirm the credibility of message board users-and in some cases, members of a company, large shareholders, or paid promoters may be committing Internet stock fraud, posting information to a message board because they stand to profit from the results.
Mass emails, also known as Spam, are so cheap and simple to create that they are increasingly being used in the commission of Internet stock fraud. Commonly, a fraudster will use mass emails to locate investors for bogus schemes or to spread false information about a company or stock, reaching millions of people at once.
Online newsletters about stocks and investment abound. Many of them are legitimate, unbiased publications, but some companies and individuals use online newsletters in Internet stock fraud schemes. In some cases, companies will pay the writers of online newsletters to recommend their stocks. These payments are legal, but to avoid committing or contributing to Internet stock fraud, the newsletters must disclose the amount that they were paid, and what company it came from. Many newsletters fail to do so. Others will spread false information or promote worthless stocks, and-in one of the most notorious forms of Internet stock fraud-"scalp" stocks, driving up the price of a stock with baseless recommendations and then selling their own holdings at the higher price to make a profit.
The most important thing for investors to keep in mind in order to avoid Internet stock fraud is to research all claims. Try to determine the identity of the person making the claim, find out more about the company whose stock is being discussed, and minimize your chances of losing money to Internet stock fraud schemes by checking all information against the federal Securities and Exchange Commission (SEC) database, EDGAR, as well as with state and independent regulatory agencies. If you suspect that you are the victim of Internet stock fraud, contact an attorney who has experience specifically with stock laws. Recovering funds lost in an Internet stock fraud is frequently a complicated process, but it doesn''t have to be impossible.
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