Regulators Launch Fake Scam Web Sites to Warn Investors About Fraud

The Securities
  and Exchange Commission today announced its launch of a
  series of Web sites designed to warn investors who rush into
  investment opportunities on the Internet without fully
  investigating the offers.
       
       Borrowing from the tactics of stock market con artists,
  the Web sites appear to be investment opportunities offering
  tremendous financial gains.  But anyone who tries to invest
  is instead led to a page that warns, “If you responded to an
  investment idea like this.you could get scammed!”  The page
  also tells investors how to research investment offers and
  where to call for help.
       
       The SEC quietly launched the first of the fake scam
  sites, www.mcwhortle.com, earlier this month, then issued a
  “spoof” press release, www.mcwhortle.com/ipogreenlight.htm,
  to promote it.  The press release, seemingly issued by
  McWhortle Enterprises Inc., boasted that SEC had “pre-
  approved” the fictitious company’s initial public offering.
  In reality, the SEC does not “pre-approve” IPOs.
       
       The press release was distributed by PR Newswire to
  hundreds of Web sites and Internet portals on Jan. 25 as
  part of the SEC project.  As a result, the McWhortle site
  received more than 150,000 “hits” in just three days.
       
        “We’re thrilled with the response,” said SEC Chairman
  Harvey L. Pitt.  “In a perfect world, everyone would read
  our educational brochures before they ran into a scam, but
  they don’t.  What we’re trying to do is warn investors while
  their guard is down.  The next time, when they encounter a
  real scam, these investors won’t let excitement cloud their
  better judgment.”
       
       The McWhortle site purports to be that of McWhortle
  Enterprises, Inc., a fictitious company that claims to have
  developed a handheld, battery-powered biohazard detection
  device that “emits an audible beep and flashes when in the
  presence of all known biohazards.”  The site solicits
  investments in the company that, in three months, will be
  “worth more than 400 times the initial investment.”
       
       The site features an audio interview,
  www.videonewswire.com/mcwhortle/012502/event.html, with the
  CEO and President of McWhortle Enterprises, Thomas J.
  McWhortle III.  SEC staffers provided the voices.  The site
  also features fictitious “testimonials” from a Wall Street
  securities analyst, a Fortune 100 CEO and a company
  customer.
       
       The McWhortle site was launched with the assistance and
  support of the National Association of Securities Dealers,
  Inc., the Federal Trade Commission, and the North American
  Securities Administrators Association (NASAA).  Other
  government agencies and law enforcement organizations will
  assist the SEC with similar sites.  The SEC does not intend
  to publicly identify the additional sites, some of which
  have already been posted on the Internet.
       
       “The Internet’s like a big city, with good
  neighborhoods and bad neighborhoods, so you’ve got to be
  careful,” said Joseph Borg, NASAA President and Director of
  the Alabama Securities Commission. “If you’re tempted by an
  investment on the Internet, call your state securities
  regulator to make sure the investment and the person pushing
  it are properly registered.  If they’re not, forget it.”
  (To contact your state securities regulator, go to
  www.nasaa.org and click on “find regulator.)
       
       In addition to announcing the fake scam Web sites, the
  SEC also issued an Investor Alert,
  www.sec.gov/investor/pubs/investorfraud.htm, to warn
  investors about investments that promise to pay sky-high
  returns for what are at best extremely risky propositions --
  and at worst are pure frauds. The alert, “High Yields and
  Hot Air,” lists the “red flags” in a solicitation that often
  send a signal that fraud may be involved.  To read the
  alert, visit www.sec.gov and click on “Investor
  Information”.
       
       The SEC gratefully acknowledges the assistance of PR
  Newswire, which volunteered its services to support this
  investor education effort.