Eventually the supply of new investors runs out and so does the cash. Victims were told that PCO was buying insurance policies from terminally ill patients at a discount when, in fact, no policies were ever purchased. Instead, PCO used money from new investors to pay previous investors and pad the bank accounts of PCO owner David W. Laing. To promote this scam, PCO used newspaper ads, financial advisors and the Internet. Another type of Internet fraud involves manipulating stock prices.
Creative Criminals Bilking investors is an old established sport.
Investment fraud is spreading to new fields as hucksters peddle partnerships in Internet shopping malls and Internet service provider firms to the unwary. To skirt registration and securities fraud laws that apply to stocks and bonds, unscrupulous operators are setting up so-called general partnerships and limited liability corporations. Often these are shell companies, explains Robert Friedman, a senior attorney for the FTC's Bureau of Consumer Protection. One such scheme involved a firm that promised to unveil an Internet shopping mall for live, online shopping in a format comparable to TV's shopping channels. Despite projected earnings of 600 percent a year, investors in the partnership were left holding essentially worthless stock certificates and no shopping mall whatsoever.