Internet Fraud Schemes: Danger in Cyberspace

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The tremendous growth of e-commerce on the Internet has allowed criminals to bring all of their pre-Internet fraudulent schemes, as well as some new ones, to a vast new market. Although the intention is to victimize consumers and investors, many of these fraudulent schemes have been cleverly disguised to resemble honest e-commerce promotions, thus making it extremely difficult for consumers and investors to separate the good from the bad and the ugly. The explosion in the number of individuals who have become victims of Internet fraud has likely undermin~d consumer confidence and helped to curtail the potential value of the Internet and e-commerce.

Law enforcement, regulatory authorities, and consumer organizations have alerted the public to many types of Internet fraud schemes over the past few years. While all fraudulent Internet schemes are bad, some are more prolific than others. This paper describes seventeen types of Internet fraud schemes that have been reported by either the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), or the Department of Justice (DOJ). While all of the Internet fraud schemes listed and discussed below are prevalent, the first five are the most pervasive.

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