Key Findings from NASAA’s Enforcement Report: Fraud on the Internet

By Patricia Uceda, Fall 2014 Graduate Research Assistant

malwareNASAA’s 2014 report on 2013 enforcement data found that in 2013 there was an increased use of the Internet for fraudulent offerings and schemes. Specifically, in 2013 one of the most reported schemes was Internet fraud involving social media and crowdfunding.

Because of the rapid and anonymous nature of the Internet, fraudsters are finding it increasingly easy to implement their fraudulent schemes online and achieve illegal gains quickly and discretely. Some of the most classic threats, such as Ponzi schemes, are much more easily implemented online and are able to rapidly grow at an alarming rate. Similarly, pump and dump schemes involving penny stock companies can reach new heights online through false and misleading claims of a company’s growth on social media.

Investors should be wary of receiving any type of investment advice on the Internet. Commonly fraudsters will post anonymous messages claiming to have inside information about a company’s stock. Before investing, investors should do some research including reading the company’s SEC filings on EDGAR or checking to see if the security is registered with a state or federal regulatory authority.