U.S. government cracks down on Internet fraud

More than 130 people have been arrested in an Internet fraud sweep

More than 130 people have been arrested and $17 million worth of property seized in an Internet fraud sweep announced today by three U.S. government agencies.

The sweep, announced by the U.S. Department of Justice, the FBI and the U.S. Federal Trade Commission (FTC), included arrests for credit card fraud, Internet auction fraud, theft of satellite TV signals, identify theft and the operation of a bogus Internet investment service.

One California man was charged with four counts of criminal infringement of a copyright and other crimes for allegedly using a camcorder to record movies in theaters and then selling the movies on the Internet. An Illinois defendant pleaded guilty to mail fraud and wire fraud for charging victims $30 or $45 for a bogus business opportunity involving stuffing envelopes at home for $2 per envelope.

The initiative, called Operation E-Con, included support from the U.S. Postal Inspection Service, the U.S. Secret Service and the U.S. Bureau of Immigration and Customs Enforcement, as well as a number of state and local law enforcement agencies in the U.S. and in other countries. Operation E-Con, which began issuing indictments in January, resulted in the arrest of 50 people this week. U.S. attorneys' offices have also charged 48 people and received 12 guilty pleas this week, according to the Justice Department.

Yesterday, the FTC announced 45 separate civil and criminal actions against alleged Web scammers and deceptive spammers in Texas and elsewhere.

"Cyber swindles and dot cons present new challenges to law enforcement," Attorney General John Ashcroft said in a statement. "The Internet enables criminals to cloak themselves in anonymity, making it imperative that law enforcement act more quickly to stop newly emerging schemes before the perpetrators can disappear in the World Wide Web."

Justice Department officials promised to continue to track down high-tech scam artists as aggressively as the agency has gone after "traditional hucksters." A Justice Department spokeswoman said the announcement today is designed to show Internet scammers that cyber crime is a priority for U.S. law enforcement agencies.

Some of the more inventive schemes alleged by the government agencies include the following:

  • A California defendant is charged with six counts of wire fraud relating to an alleged scheme to steal nearly $600,000 worth of computer equipment from businesses in Massachusetts and California. According to the indictment, the defendant set up a fictitious corporation, complete with a full-featured Web site and a sham escrow company.
  • Two Maryland defendants are charged with devising a scheme to lure unsuspecting bank customers to "spoofed" bank Web sites, where victims would enter confidential account data. The defendants then would use the data to produce and use fake ATM and credit cards.
  • Two California defendants have been indicted on fraud and money-laundering charges for setting up one of the largest Internet investment fraud cases in the country, according to the Justice Department. The investment club allegedly netted more than $60 million from 15,000 investors worldwide. The club's Web site allegedly guaranteed investors a 120% annual rate of return with "no risk of losing the investor's principal investment," as well as substantial referral fees for directing others to the Web site, but the club never invested any of the victims' money. Instead, the two defendants and others allegedly used the funds to purchase millions of dollars' worth of real estate in Mexico and Costa Rica, as well as a yacht and a helicopter; they also allegedly funneled money to dozens of shell companies created in Costa Rica.
  • Five Pennsylvania defendants were indicted on a charge of conspiracy for allegedly obtaining identification information about residents of Mount Lebanon from the Mount Lebanon Municipal Tax Office, where the defendants were employed as janitors. The defendants allegedly used that information to apply for credit cards over the Internet.
  • Two California defendants were indicted for one count of conspiracy to commit wire fraud and 41 counts of wire fraud. A man and his Russian-speaking wife allegedly operated a fraudulent Russian dating scheme. The two allegedly bilked more than 400 victims of at least $600,000 over three years by either contacting male victims through online personal ads or posting their own online personal ads in which they claimed they were Russian or Ukrainian women desiring romantic relationships.

Copyright © 2003 IDG Communications, Inc.

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