MISLEADERS "the Tipsters" (mostly anon). Law closing in on Net Stock manipulators.greenspun.com : LUSENET : TB2K spinoff uncensored : One Thread |
Easy manipulation
In some ways, Internet cons are like the investment swindles of yesteryear. The swindler generally tells you "inside" information that you need to act on immediately or the opportunity will be lost. But there's a huge difference that often makes these "new economy" swindles harder to resist: the Internet.
SNIP...LIKE STOCKPILING 2 YEARS WORTH OF FOOD BECAUSE OF A COMPUTER DATE PROBLEM ON MAINFRAMES OR PHYSICAL SYSTEMS IN POWER PLANTS.
"The good thing about the Internet is it is a democratizing force. It is giving you more information and opportunity than you had before," Mr. Emshwiller says. "But democracy is a messy thing. With it comes responsibility. You have to be careful about how you use that power."
http://dallasnews.com/business/columnists/104912_kristof_02bus..html Kathy Kristof: Let the investor beware: Internet rife with swindlers
07/02/2000
By Kathy Kristof
Personal Finance
No one knows precisely how many individuals cruise the Internet's copious stock chat rooms and bulletin boards with the intent of manipulating stock prices by not only finding greater fools, but also by creating them through imaginative tales of riches to be made.
What's certain is that they are many and their ranks appear to be swelling daily, as more investors go online and are lured by the promise of making millions at the mere click of a computer mouse.
Consider the case of Yun Soo Oh Park, a.k.a. "Tokyo Joe," a former restaurateur accused of manipulating stocks and misleading investors. He has reportedly earned more than $10 million, largely through subscriptions to his online newsletter. The Securities and Exchange Commission says the newsletter regularly touted stocks that Mr. Park was selling at the same time.
Mr. Park, who is contesting the SEC's case, has said his trading does not present a conflict because he has clearly disclosed that he may indeed be selling shares in companies he has recommended.
Then there's Fred Moldofsky, a self-described day trader who allegedly posted fake news releases to pummel the price of Lucent Technologies shares. And there's Stephen Sayre, a former tree trimmer who allegedly pocketed nearly $1.4 million in 10 days by selling shares in EConnect after issuing false statements touting the company's stock.
The SEC also has cases pending against those two, with responses from Mr. Sayre and Mr. Moldofsky expected soon. In an interview with a news service, however, Mr. Sayre denied profiting from the transactions.
Regardless of the merits of these particular cases, John Emshwiller, author of Scam Dogs and Mo-Mo Mamas: Inside the Wild and Woolly World of Internet Stock Trading (Harper Collins, 2000), says that characters with colorful monikers and often dubious pasts have become an increasingly seductive and dangerous force in the world of Internet trading.
Investors beware.
"You cannot wait for the SEC to come along and protect you," Mr. Emshwiller says. "The world is moving too fast and the temptations are too great."
Easy manipulation
In some ways, Internet cons are like the investment swindles of yesteryear. The swindler generally tells you "inside" information that you need to act on immediately or the opportunity will be lost. But there's a huge difference that often makes these "new economy" swindles harder to resist: the Internet.
First, they don't call you on the phone to give you a hard sell and urge you to send them a check via Federal Express. Instead, they're reaching you through a medium that can connect millions of people at a time. And rather than sending them money directly, they want you and all the other people lurking in a chat room or reading an online bulletin board to click over to your favorite broker and make a trade.
What you probably don't know is that, if enough people like you take the bait, the tipster can make a fortune trading in the opposite direction. While you feed the buying frenzy, pushing the stock's price up, the tipster sells shares in what he knows to be an overvalued or even worthless company. By the time you find out that the stock is worth little or nothing, the tipster probably has gone on to a new stock, a new chat room and maybe a new moniker.
"A lot of it is adapting to this new medium," says Philip Rutledge, deputy chief counsel for the Pennsylvania State Securities Commission. "The public needs to understand the ulterior motives. The tipster may be trying to 'pump and dump.' They talk up a stock because they bought it and they need you to feed into a buying frenzy so they can sell."
This type of scam is what the title of Mr. Emshwiller's book is all about. A "mo-mo mama" is a stock driven by trading momentum that's often fanned by a handful of chat-room tipsters. A "scam dog" is one step worse: a stock that is overvalued at best, a complete fraud at worst.
Listening to these tipsters is seductive because they often can drive the price of a stock up just by saying it's heading higher. If you are quick on your feet, you can make a profit through rapid-fire buying and selling, Mr. Emshwiller says. Unfortunately, few investors are that quick. They end up coming home after a long day's work to find that the stock they bought in yesterday's buying frenzy has crashed today.
Do your research
There are no easy ways to protect investors from venal tipsters on the Internet, experts agree. Neither the SEC nor private watchdog groups appears close to stemming the rising tide of Internet-based stock swindles.
Instead, investors need to protect themselves in old-fashioned ways. Do your own research. Determine whether a company has value before you buy it, Mr. Emshwiller says. Investigate the backgrounds of company officers. You'd be surprised how many corporate "consultants" have criminal records or backgrounds pockmarked with allegations of fraud, he adds.
This research is easy to do on the Web through the SEC's Edgar database (www.sec.gov), which posts financial statements and other regulatory filings. But it takes time and commitment.
In other words, chat rooms, bulletin boards and other features at investing Web sites can be useful places to gather ideas, but they should be used only as a starting point. Investors should always carefully consider the source, then inspect company balance sheets and other data before making decisions.
"The good thing about the Internet is it is a democratizing force. It is giving you more information and opportunity than you had before," Mr. Emshwiller says. "But democracy is a messy thing. With it comes responsibility. You have to be careful about how you use that power."