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FTC settles Y2K fraud case

A California mining company settles with the Federal Trade Commission on charges it allegedly used fears of the Year 2000 computer glitch to mislead investors, according to U.S. government officials.

A California mining company has settled with the Federal Trade Commission on charges it allegedly used fears of the Year 2000 computer glitch to mislead investors, according to U.S. government officials.

Using the Internet, the company, Selket Precious Metals, and its president, Paul Byus, marketed shares of stock in Selket and certificates redeemable for gold from its own mine, according to an FTC statement issued today. Potential investorsY2K: The cost of fear were assured that an investment in the company's stock would increase in value, because Y2K-related concerns would drive up the price of gold, and gold certificates would be just like money due to chaos following Jan. 1, the company speculated, according to the FTC.

Selket could not be reached for comment.

Under the terms of the settlement, Selket would be permanently prohibited from making false representations about the potential risk and return of investments in its mining operations or the value of any ore deposits, that its mine will be operational in any given period of time, or that a known quantity of ore will be mined.

According to the complaint, since January 1995 Selket used the Internet and other means to sell unregistered stock, based on the promise that an investment in the company's Herculean gold mine, located in Baker, Ore., was low-risk and likely to yield high returns in a short period of time.

In its marketing materials, Selket claimed that the mine would yield hundreds of ounces of gold per week, resulting in a total yield of "$100,000 per week, or $400,000 per month, at $300 per ounce," the FTC said.

In addition, the company allegedly marketed worthless gold certificates to investors over the Internet, promising that they would be a safe investment that would appreciate in value after Jan. 1, when the nation's financial systems could collapse. The company claimed that such an investment in its gold certificates would be safe from any ill effects of Y2K on the economy, and that they could be used as money after the century date change.

However, according to the FTC complaint, the mine is not currently producing any gold and will not be fully operational within a few months. Thus, the company does not have the gold necessary to back representations made about the safety, liquidity and profitability of its gold certificates.

"Using Y2K-related fear tactics to make a quick buck from consumers is unconscionable," Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, said in a statement. "Consumers should be wary of any offers that play on Back to Year 2000 Index Pagetheir fear of Y2K-related financial difficulties. This is the third Y2K-related case the FTC has brought, and we will continue to be on the lookout for other schemes related to the Year 2000 date change."

The settlement requires final court approval and is not binding until signed by a judge.

The first two complaints, brought by the FTC earlier this year, involved companies that allegedly sold hundreds of consumers worthless credit card protection services that they claimed would shield cards from Y2K problems.