Three federal agencies today are joining forces to fight firms they allege are deceiving consumers with entertainment-related investment scams, the Federal Trade Commission said.
The FTC, the Securities and Exchange Commission, and 20 members of the North American Securities Administrators Association (NASAA) today launched "Project Risky Business," in which the agencies leveled "law enforcement actions" at nearly 60 firms engaged in an array of enterprises from hawking Elvis Presley memorabilia via infomercials to operating a Net gambling casino.
The project launch comes on the same day that New York State Attorney General Dennis Vacco announced plans to sue World Interactive Gaming for alleged illegal activity and deceiving investors.
World Interactive Gaming also is a target for the FTC under Project Risky Business. The Bohemia, New York-based Net gambling firm was one of three companies against which the FTC filed complaints in federal court today.
The FTC and Vacco allege that executives from World Interactive Gaming raised roughly $2 million from more than 100 consumers.
Along with the FTC's complaints, the agency also announced that it settled an action from last year. Executives from Coastal Gaming agreed to pay $5 million each to settle FTC charges that "they misrepresented to potential investors that the investments they were offering in casino gambling ships would yield high returns; that celebrities were in line to promote the investment opportunities; and that there was a $1 million escrow account in place to guarantee the investment," according to the agency.
The FTC, the SEC, and the NASAA have worked together in the past to crack down on scammers. This is their third project dealing with investment-related fraud, said Heather Hippsley, assistant director of service industry practices for the FTC.
"[The three agencies] have worked together over the past few years on projects like this," Heather Hippsley said. "We saw a trend in entertainment-related schemes," and that led to Project Risky Business.
Both Hippsley and NASAA spokesman Marc Beauchamp noted that the explosion in the Net's popularity has made it a popular place among schemers, who advertise via unsolicited bulk email and on standalone Web sites.
"We are seeing more and more of a trend for sales through Internet advertising," Hippsley said. "They're all running Web sites advertising their investment schemes."
Beauchamp of the NASAA, which represents state securities regulators, agreed. "The Internet has become a vehicle to market these scams and also is integral to some of these businesses," he said.
"It makes perfect sense," he noted. "You've got to reach a lot of people to reel in the few suckers. With the Internet, you can send out, in theory, spam by the millions for nothing, then just wait for the responses.
"A year ago, [spam] was all porno, but now it's all investment schemes," he added. "It looks like sex is losing out to money on the Net."
Beauchamp said the NASAA's law enforcement actions in the project run the gamut from sending cease-and-desist letters to alleged perpetrators to seeking temporary injunctions in court, freezing companies' assets, and making arrests and filing criminal charges.
The SEC's involvement comes on the heels of the agency creating a specialized unit to root out investment scams, pyramid schemes, and other bogus offerings online. The SEC said last month that its Web site receives more than 120 complaints each day regarding possible Net-related fraud.