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Internet Investment Scams


When it comes to investment opportunities on the Internet, the advice from the Minnesota Department of Commerce (DOC) is "buyer beware."

Anyone can reach tens of thousands of people through the World Wide Web easily, cheaply and anonymously. Because the Internet allows scam artists to create very credible looking messages, it is harder than ever for consumers to separate fact from fiction.

The department warns consumers to be alert for the following signs of on-line investment fraud:

  • Be wary of promises for quick profits, any mention of "inside" information, or pressure to invest before you've had a chance to investigate.

  • Don't assume that people on-line are who they claim they are. Some salesmen hide their true identity with a pseudonym. Look for other promotions by the same person.

  • Words like "guarantee," "high return," "limited offer," or, "as safe as a CD" may be a red flag. No financial investment is risk free and a high rate of return means greater risk.

  • Watch out for offshore scams and investment opportunities in other countries. When you send your money abroad and something goes wrong, it's more difficult to find out what happened and track down your money.

Consumers can also help protect themselves by following these tips from the DOC and the Securities Exchange Commission:

  • Beware of anyone selling investment programs that are not affiliated with a reputable financial services institution.

  • Download and print a hard copy of any on-line solicitation you are considering. Make sure the copy shows the URL (Internet address) and note the date and time you saw the offer. Save this for future reference.

  • Ask the on-line promoter if they have been paid to tout the opportunity, and if so, how much and by whom.

  • Before you invest, always obtain written information, such as a prospectus or annual report. If no written information is available, watch out.

  • Don't assume your Internet access provider or on-line service has approved or even screened the investment. Anyone can set up a web site and advertise on-line, often without a check of its legitimacy or truthfulness.

  • If you do complete an on-line transaction, don't assume that it will be executed immediately. Your transaction may take a day or more to go into effect.

Before investing, consumers should call the Minnesota Department of Commerce at 1-800-657-3602 to find out if the security they are considering is registered with the state.