Stock Promoters Hunting Victims On The Internet

They still use one-on-one telephone calls to ply their trade, but investment swindlers in increasing numbers are graduating to the future, using the Internet to post phony sales pitches to millions of potential victims.

Securities regulators say they, too, are out there surfing the Net, looking to protect investors intrigued by too-slick offerings.

A worldwide telephone lottery, a company cultivating eels and a Costa Rican manufacturer of coconut products are just some of the recent investment scams with big payoff promises flagged on the Internet by securities regulators.

The U.S. Securities and Exchange Commission said it is assigning ever more staff to cyberspace.

“We will remain committed to surfing the Internet, and when there is a need to protect investors we will bring quick and effective enforcement actions,” said Martin Kuperberg, senior associate regional director of the SEC in New York.

That branch brought its first and so far only Internet fraud case in October against a 27-year-old Williamsport, Pa., man who for months allegedly used Internet messages on business news groups to lure computer users to invest in two Costa Rican enterprises, both supposedly dealing in coconuts.

Scott Frye falsely stated that he had distribution channels in place and an agreement with A&P supermarkets for the coconut products, the SEC alleged.

In reality, Frye’s company was not manufacturing any coconut products, the SEC charged.

A Manhattan federal court has frozen Frye’s assets and granted a preliminary injunction against him violating any further securities laws.

Philip Feigin, Colorado’s securities commissioner and a former president of the North American Securities Administrators Association said abuse is likely to increase.

“Users need to treat these messages like a cold call or an unsolicited letter,” he said. “It seems people are more worried about downloading some virus from the Internet than they are about mailing $5,000 to some stranger.”