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WWW of Deceit
WWW of Deceit: Internet Grifters


By Net4TV Voice Staff
(May 24, 2001)

By the Numbers
  • 27 FBI Field Divisions
  • 61 cases filed
  • 110 Counts of criminal conduct
  • 117.5 million dollars lost
  • 56,170 victims
  • 27 Search or Seizure
  • 57 Arrest, Plea, or Convictions
  • 90 Information or Indictments
P.T. Barnum once said "There's a sucker born every minute." But with the advent of the Internet, perhaps it should be revised to "A sucker logs-on every minute," and the dot-con grifters have been raking in the bucks with come-ons and offers that are truly too good to be true. But their (con)jobs just got harder.

Earlier this week, the FBI, the Department of Justice and the National White Collar Crime Center (NW3C) announced that criminal charges have been brought against 88 individuals and companies as part of a nationwide series of investigations into Internet fraud. The investigation was code named "Operation Cyber Loss," and was initiated by the Internet Fraud Complaint Center (IFCC) of the FBI.

Subjects are facing a variety of Federal and state criminal charges which include fraud by wire, mail fraud, bank fraud, money laundering, and intellectual property right violations. The fraud schemes exposed as part of this Operation represent over 56,000 victims who suffered cumulative losses in excess of $117 million, which works out to be an average of $2,000 per victim, although the majority of the losses were less than $500.

Among the fraud schemes targeted are those involving on-line auction fraud, systemic non-delivery of merchandise purchased over the Internet, credit/debit card fraud, bank fraud, investment fraud, multi-level marketing and Ponzi/Pyramid schemes.

Internet fraud can be defined as any fraudulent scheme in which one or more components of the Internet, such as Web sites, chat rooms, and e-mail, play a significant role in offering nonexistent goods or services to consumers, communicating false or fraudulent representations about the schemes to consumers, or transmitting victims' funds, access devices, or other items of value to the control of the scheme's perpetrators. Many of these cases were initiated as a result of fraud complaints the IFCC received from individuals and businesses.

Director Louis J. Freeh stated, "The criminal charges being announced today demonstrate the critically important role that the IFCC plays in combating crime in cyber space. It is essential that law enforcement, e-commerce, and victims of crime have this electronic clearinghouse to expeditiously disseminate Internet fraud cases to the appropriate agency for investigation."

The IFCC, which became operational on May 8, 2000, is charged with addressing fraud committed over the Internet. Victims of Internet crime are able to go directly to the IFCC web-site at www.ifccfbi.gov, to submit their complaint information.

This one-stop shop for complaints is designed to relieve the frustration most of us feel in trying to determine which law enforcement agency should receive a complaint. For law enforcement and regulatory agencies, the IFCC offers a central repository for complaints related to Internet fraud.

The IFCC, located in Fairmont, WV, is a joint operation between the FBI and the National White Collar Crime Center (NW3C). It is the first project of its kind, a partnership between a federal law enforcement agency, and a non-profit private organization, serving Federal, state and local law enforcement agencies.

The accomplishments of this Operation are a direct result of the close working relationship law enforcement has developed with the private sector and e-commerce companies. As an example, Pay Pal, Inc. and Motley Fool have provided great assistance in identifying individuals engaged in wrong doing and reported that to the IFCC. The support and cooperation provided the FBI by other private sector companies such as Microsoft has also been instrumental in the success of Operation Cyber Loss.

Common Internet Fraud Schemes

Online Auction/Retail
The fraud attributable to the misrepresentation of a product advertised for sale through an Internet auction site or the non-delivery of merchandise or goods purchased through an Internet auction site.

Investment Fraud
An offering that uses false or fraudulent claims to solicit investments or loans, or that provides for the purchase, use, or trade of forged or counterfeit securities.

Business Opportunity/ "Work at Home"
The offering of a phony job opportunity, often with associated charges such as "processing or application" fees. Perpetrators frequently forge the name of a computer service or Internet Service Provider.

Financial Institution Fraud
Misrepresentation of the truth or concealment of a material fact by a person to induce a business, organization, or other entity that manages money, credit, or capital to perform a fraudulent activity.

Credit Card Theft/Fraud
The unauthorized use of a credit/debt card or credit/debt card number to fraudulently obtain money or property. Credit/debt card numbers can be stolen from unsecured web sites.

Ponzi/Pyramid Schemes
An investment scheme in which investors are promised abnormally high profits on their investments. No investment is actually made. Early investors are paid returns with the investment money received from the later investors. The system usually collapses, and the later investors do not receive dividends and lose their initial investment.

Non-Delivery of Goods/Services
The non-delivery of goods or services which were purchased or contracted remotely through the Internet, independent of an Internet auction.


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