Things Are Not Always What They Seem: Beware of the Tricks Scammers Have Up Their Sleeve to Make Their Entities Appear Legitimate

By Nataliya Nemtseva, Spring 2014 Student Intern

something up sleevesIf you have ever watched the National Geographic Channel TV series, “Brain Games,” you have seen that our brains use shortcuts to interpret information presented to us, based on preconceived notions and our experiences with similar situations. For example, one of the episodes demonstrated that individuals are likely to believe even an implausible story if it comes from someone who looks like a news correspondent, because we generally rely on these professionals for such information. Hoping that individuals would similarly trust investment offers more if they appear to be supported by or connected to the government, some investment scammers developed fraudulent schemes, geared at giving the impression that the investment solicitation is approved by the government. Over the last few years the SEC has issued multiple alerts, warning investors of such schemes and urging individuals not to take shortcuts when it comes to their investments. This blog entry will provide you with some examples of the tricks fraudsters use to make their entities appear legitimate in order to induce individuals to invest in fictitious entities.

Bag of Tricks

Misleading Email and Domain Addresses

Some fraudsters use email or domain addresses, which contain “.gov” and end with “.us” or “.org.” These scammers count on the likelihood that a person seeing “.gov” in a domain or an email address will assume that the entity is somehow connected to the government. For example, domain addresses such as www.gov.bogusdomain.us and www.gov.sec.org in reality have no connection to legitimate government entities, but are intended to appear as if they do. To avoid being tricked by this, the key is to remember that legitimate government entities do not only have “.gov” as part of their domain or email address, but also have “.gov” appear at the end of their address, such as www.sec.gov. Alternatively, legitimate U.S. government addresses end with “.mil” or “fed.us.” For more information, please see the SEC Alert on “Bogus Securities Regulators.”

Impersonating Government Employees

Fraudsters may also contact investors in person by phone or by email, posing as SEC staff members or other government employees. It is most likely a scam if the communication suggests the SEC’s endorsement of investment offers, assistance with securities transactions, offers of financial aid or participation in fund transfers. The SEC simply does not make such solicitations. To learn more about this, check the SEC Alert on Government Impersonators.

Misusing a Regulator’s Seal

In an attempt to make an investment offer appear legitimate, fraudsters may incorporate a copy of a regulator’s official seal or logo, or a made-up seal of a fictitious regulator into their documents or websites. However, the SEC warns investors that U.S. state and federal regulators, as well as foreign regulators do not authorize private entities to use regulators’ seals or logos. For more information, check the SEC Fake Seal Alert.

Fabricating Agency Contact Information

Some fraudsters may go even a step further. They may insist that the investment is registered with an appropriate agency and invite you to verify that information by giving you the agency’s contact number. The catch is that the phone number they provide, most likely, will not connect you to the official agency, but rather to the solicitor’s associates, who will confirm the solicitor’s fabricated claims. For more information, please see the SEC Alert concerning Fake Phone Numbers.

It’s Not Magic

No magical power is necessary to determine whether the information you have been provided is in reality what it is claimed to be. The following are some of the ways you can verify that information:

 

  • If the person contacting you claims to be an SEC staff member, you may call the SEC’s personnel locator to verify that the person is in fact an SEC employee and to speak to that person directly.

 

 

As we’ve mentioned on this blog before, if something doesn’t seem right, inquire further. The communication might be a fraudster impersonating a government official or engaging in some other type of phishing.