Three federal agencies today are joining forces to fight firms they allege
are deceiving consumers with entertainment-related investment scams, the Federal Trade Commission
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.
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.