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Investors target of spam and scam

Fraudsters are prowling the Internet

By Bina Brown

Real lotteries, like Japan's Dream Jumbo above, sell tickets. A "free" lottery doesn't make sense.


Gaming and Lotteries
Computer Security

(CNN) -- Have you won the lottery lately? Not the one you bought a ticket in for last Saturday night's big draw, but the international one from Amsterdam or Spain?

Welcome to one of the longest running and most widespread scams infiltrating the Internet and catching people out.

According to, two years ago 50 million people worldwide fall for an average 1.4 scams each, costing them billions of dollars.

The lottery scam, the Nigerian letter scam, business opportunities, investment tips and schemes and "phishing" are among the many ways people are being fleeced of their hard earned cash.

Some parts of the world refer to these types of scams as Advance Fee Fraud or the 419 scam -- named after the section of the Nigerian penal code dealing with fraud.

Unfortunately the number of people caught for their part in an Internet scam is far fewer than the number of victims.

First, the lottery scam. It should seem obvious that it is a scam, but people still fall for it. Did you buy a lottery ticket from this company? Given that the primary purpose of lotteries is to raise money, they need people to buy tickets in order to have a chance to win.

As one scam-watch site pointed out, lottery companies do not organize "promotional" lotteries, they advertise. A free "promotional" lottery that you only hear about if you win would only promote the lottery to a handful of customers. That doesn't make any sense.

If you answer the e-mail, after one or two e-mail exchanges with the so-called lottery officials or claims agent, perhaps accompanied by some official looking but fake documents, you'll be asked to pay fees for taxes or handling or some other reason. This is the scam -- you pay the fees and never see any winnings, mainly because there are none to see.

Phishing. Fishing is one of the world's most popular sports. An Internet form, spelt phishing, is proving to be no less popular.

If you have been sent an e-mail apparently from a bank, credit union, online broker or perhaps eBay, asking for you to confirm your account details, then it is highly likely you have been "phished".

If you have responded then what has actually happened is you have sent your personal details to a mob of crooks who more than likely took money from your account or were planning to do so at some point in the future.

Giving away your PIN is like handing a stranger your front door key and then wondering why sometime down the track your television has been stolen.

According to the U.S.-based anti-phishing working group, 7197 new phishing sites were set up in December 2005 -- with 121 brands hijacked -- compared with 1707 sites in December 2004. That is 239 new sites every day or nine every hour!

The number of URLs set up specifically to steal passwords hit a record at 1912 in December 2005 compared to 526 six months earlier.

Ramping. It is usually when stock markets are on the rise or trading at high levels that people start to take the greatest notice in shares and their potential for gains.

So it is no surprise that the so-called "pumpers and dumpers" or "rampers" are out in force in cyberspace.

Fraudulent operators send out millions of spam e-mails or letters telling recipients that a particular stock will improve in value for some compelling reason.

The message fools gullible people who act on it. The sudden demand for the stock increases its share price. During this contrived boom, the promoters sell the shares they had acquired previously, and make a sizeable profit. The new owners of the stock are left with a loss since they have paid more for the shares than they are worth.

The best protection against scammers is to hit the delete key or hang up in the case of a mystery telephone call.

Protecting your computer with security software like firewalls and anti-spam filters will help reduce the amount of spam e-mails.

However, even then you may still get spam -- in which case you should never respond.

Do not follow the link, do not provide any of your personal or financial details, or even better -- delete the email before you open it.

And remember, if it sounds too good to be true, it probably is.

Other scams

Other hot scams include:

Boiler Room. Boiler room operations are based outside a targeted investor's home country. They earn money by calling investors, without invitation, and selling shares to them. These shares often carry very high risk and may be worth a lot less than you pay. As a rule, they are not quoted on any stock exchange and you will not be able to sell easily.

The scam: Once you agree to buy shares you will be asked to send in your money in exchange for share certificates. Sometimes you may receive share certificates for shares worth much less than you have paid. Sometimes the boiler room will simply disappear and you will never see your money again.

Business opportunities. These business opportunities make it sound easy to start a business that will bring lots of income without much work or cash outlay.

The scam: Many of these are illegal pyramid schemes masquerading as legitimate opportunities to earn money.

Chain letters. You're asked to send a small amount of money ($5 to $20) to each of four or five names on a list, replace one of the names on the list with your own, and then forward the revised message via bulk e-mail.

The scam: Chain letters -- traditional or high-tech -- are almost always illegal, and nearly all of the people who participate in them lose their money.

Work-at-home schemes. Envelope-stuffing solicitations promise steady income for minimal labor. For example, you'll earn $2 each time you fold a brochure and seal it in an envelope. Craft assembly work schemes often require an investment of hundreds of dollars in equipment or supplies, and many hours of your time producing goods for a company that has promised to buy them.

The scam: You'll pay a small fee to get started in the envelope-stuffing business. Then, you'll learn that the email sender never had real employment to offer. Instead, you'll get instructions on how to send the same envelope-stuffing ad in your own bulk e-mailings. If you earn any money, it will be from others who fall for the scheme you're perpetuating. And after spending the money and putting in the time on the craft assembly work, you are likely to find promoters who refuse to pay you, claiming that your work isn't up to their "quality standards."

Effortless income. The trendiest get-rich-quick schemes offer unlimited profits exchanging money on world currency markets; newsletters describing a variety of easy-money opportunities; the perfect sales letter; and the secret to making $4,000 in one day.

The scam: If these systems worked, wouldn't everyone be using them? The thought of easy money may be appealing, but success generally requires hard work.

Investment opportunities. Investment schemes promise outrageously high rates of return with no risk. One version seeks investors to help form an offshore bank. Others are vague about the nature of the investment, stressing the rates of return. Many are Ponzi schemes, in which early investors are paid off with money contributed by later investors. This makes the early investors believe that the system actually works, and encourages them to invest even more.

The scam: Ponzi schemes eventually collapse because there isn't enough money coming in to continue simulating earnings. Other schemes are a good investment for the promoters, but not for participants.

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