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Avoid The Funny Money

By Jim Rendon

While the dotcom millionaires have dazzled everyone with their instant wealth, few have noticed the long caravan of snake oil salesmen riding in on their tails, ready to feed off this valley's instant greed frenzy.

Behind the spam emails, misrepresented investment newsletters, slickly produced websites and chatrooms, are all kinds of schemers hoping to make it big off someone else's hard-earned cash. But not to worry, the government is watching out for you. And that's not even a joke. The SEC has an entire division devoted to sleuthing out online investment fraud, and an entire section of its website is dedicated to avoiding scams.

Among the most common schemes is the pump and dump. People with shares of worthless stock hype it through online chats and questionable newsletters. When enough unwary investors buy in, the price spikes, and they sell, leaving a chat room full of rubes with funny money on their hands. Others have sold nonexistent securities, and over-hyped the potential returns on their actual plans. The first IPO offered over the Internet turned out to be nothing more than a way for a Santa Cruz man to finance a beach-side vacation rental.

Uncle Sam recommends a few easy-to-follow tips when taking the plunge on some investment opportunity dredged up on the web. Investors can check with the SEC to see whether anyone has complained about the company or the seller. Always ask anyone hyping a company if they've been paid to do so. And never invest a dime without seeing a hard copy of some sort of financial information; this ensures that they have enough cash to at least pay a printer. At the very least, always do a background check online. Many financial sites can be easily searched. With the amount of business journalism floating on the web, anything legit will have at least a few sentences typed up somewhere.


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From the March 16-22, 2000 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © 2000 Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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