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Alleged Ponzi scheme pushed via social media brought down

It wasn't that long ago, just in 1995, that scientist Clifford Stoll dismissed the Internet as something that was little more than a fad. He confidently declared in various news outlets at that time that the online experience was being "grossly oversold" and that it would be dead in two or three years. Would anyone, especially we in California, disagree that he was a bit off the mark?

On the other hand, there are many who might say that Stoll's observation, that the Internet is a "wasteland of unfiltered data," was true back then and remains true today. That might be particularly so in the context of what's pushed through social media. We were reminded of that reality once again last week, courtesy of the Securities and Exchange Commission. 

The SEC, with the OK of a federal court, froze the accounts of two firms. The allegation is that the companies Fleet Mutual Wealth and MWF Financial, which operated under the umbrella name Mutual Wealth, used social media outlets including Facebook and Twitter to engage in investor fraud.

The regulator says the firms promised returns of up to 3 percent a week through a strategy of high-frequency trading in securities. It says the company also encouraged clients to recruit others into the program by offering commissions for new investors registered. That allegation apparently sparked a charge that the activity amounted to a pyramid scheme.

The SEC says that about 150 people in the U.S. put about $300,000 into the operation, but it says the money never got invested in anything. Rather, investigators say it went into offshore bank accounts under names for fake companies.

The SEC investigation into this alleged criminal activity is still underway, but there are some lessons that might be drawn from it right now. One would be that just because something appears on the Internet doesn't make it reliable. Another would be to remember that if something sounds too good to be true, it probably is.

All that said, if you believe you have a claim of alleged investor fraud, you should be in touch with an attorney to explore your options regarding possible recovery.

Source: USA TODAY, "U.S.: Pyramid scam on Facebook, Twitter busted," Mark Krantz, March, 5, 2014
Source: San Diego Daily Transcript, "Investors, beware: Social media is key tool for you -- and con artists," George Chamberlin, March, 11, 2014

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