High Tech Investment Fraud Schemes
If You Could See Me Now
Law enforcement efforts against high-tech investment schemes and promoters paid off after the California Department of Corporations filed charges in a video-phone case where the hustler promoting an interactive video distribution service (IVDS) deal continued to solicit investor funds using a telephone in a detention center.
A total of $12 million in investor funds was collected in this scheme in which undisclosed commissions of 50% were charged on the investment and only ½ of 1 percent of the proceeds were actually going to developing a wireless cable TV project.
What's On the Other Channel?
More than $8.8 million was raised from more than 600 investors across the country, through at least two boiler rooms, in a scam involving Internet website-based "channels".
In selling the fraudulent investments they first of all said that sales commissions were 12% when, in fact, they were 45%; that the President and Chief Executive Officer of the company was a "highly successful lawyer" when, in fact, he has been disbarred by the State Bar of California for misappropriating client funds.
In this case, they managed to divert substantial sums for personal use and wired almost $3.2 million to Hong Kong.
Yahoo, I'm Rich!
An organization with headquarters in Los Angeles, but with boiler rooms in several U.S. cities, defrauded over 3,000 victims nationwide out of almost $50,000,000 through its design, development and marketing of a series of "high-tech," telecommunications-related securities (including 900-number, pay-per-call services, virtual shopping malls and Internet service providers), which were described to investors as "general partnerships".
The general partnership units cost in the range of between $5,000 to in excess of $240,000 and were to be owned by the investors and a corporation which was to serve as the Initial Managing Partner.
All of their impressive newsletters, sales scripts, glossy brochures and other offering documents indicated that these were turnkey businesses.
In them, they described the personnel already employed and equipment already acquired and ready to become operational when the offering was completely funded.
The promoters claimed that each of the ventures were viable businesses substantially ready for profitable operations; that your funds would be used for the further development of the "turnkey" business, that it was being managed and controlled for your benefit by the Initial Managing Partner and that the business would be turned over to you at the first partnership meeting.
They also claimed that you would reap immediate and substantial profits of up to 300% and that you would not only have a steady income from the business, but would also receive a huge bonus from stock sales when the company became publicly-traded like Yahoo.
They encouraged older consumers to invest their retirement savings by claiming that the offerings were low risk, conservative investments and that their earlier companies were enjoying success and receiving offers to be bought out by other companies but failed to mention either that the Initial Managing Partner received a management fee equal to 85% of the funds invested or that there were no actual business enterprises already created, merely worthless shell corporations.