Phantom Regulators: Case Histories

  • In New Jersey, the state Attorney General and Bureau of Securities obtained a court order in April, 2005 to seize a bank account containing about $2.5 million and shut down phone lines of a fictitious company, Heritage Financial Inc., which was used as a front by con artists who defrauded stockholders by making false offers to purchase stock shares at inflated prices. Victims were asked to pay thousands of dollars in up-front transaction fees, but the stock purchases were never completed. When people questioned the legitimacy of Heritage Financial Inc. or the purchase offer, they were directed to telephone one of several regulatory agencies that the con artists fabricated and falsely portrayed as legitimate on Internet sites, including the International Exchange Regulatory Commission, the International Securities Department, the Regulatory Compliance Commission, the Securities Protection Agency and the International Registry Corp. In fact, all of the phone numbers provided by the defendants were linked to the same computer or network of computers through an Internet service that allows personal computers to serve as telephones. The defendants had an account with an Edison-based telecommunications company that allowed them to establish dozens of computer-linked telephone numbers, including numbers with out-of-state area codes. Details. For more information, contact: Peter Aseltine (609) 292-4791
  • In Missouri, the Missouri Commissioner of Securities, David B. Cosgrove, issued a Cease and Desist Order in July 2005, against the “Securities Compliance Department,” a bogus entity claiming to be a securities regulator located in Kansas City, Missouri. An investor contacted the Missouri Securities Division in Secretary of State Robin Carnahan’s office to report a phone call he received from the “Securities Compliance Department.” Months before, the investor was a victim in an international investment fraud. Posing as a securities regulator, a caller named “Shore” claimed that the “Securities Compliance Department” could help him recover some of his loss—but only for a fee. Shore told the investor that he would have to pay over $20,000 to the “Securities Compliance Department” to get his money back. He also gave the investor a false Kansas City Missouri telephone number and address along with a website address. Details. For more information, contact: Stacie Temple, (573) 526-5076
  • In Montana, the Montana Securities Department received multiple international inquiries regarding Royal Acquisitions, Inc. and the International Securities Regulatory Commission, which claimed to be based in Helena, Montana. Royal Acquisitions has been contacting individuals in Australia, New Zealand and the United Kingdom offering to purchase shares of stock from the individuals, otherwise thought to be worthless.  But in order to sell the stock to Royal Acquisitions, the investors must send them 10% of the total purchase price to be paid, as a supposedly “fully refundable” Investment Verification Credit. Royal has been advising investors to contact a website for the International Securities Commissioner for verification that Royal is a valid corporation. An investigation determined that there is no International Securities Regulatory Commission based in Montana. The Department found no record of Royal Acquisitions, Inc. or the International Securities Regulatory Commission ever registering or conducting business from the state, in any capacity.  Royal Acquisitions, Inc. is not authorized by this state to purchase shares of System Pros, International or any other stock.  Website and physical addresses provided by Royal Acquisitions appear to be fictitious and d the telephone number, local to Helena, appears to switch to an international connection. Details. For more information, contact: Stacia Dahl, (406) 444-3152
  • In Massachusetts, the Massachusetts Securities Division filed an administrative complaint in April 2004 against RJL International Limited after receiving numerous complaints from overseas investors. An investigation determined that the firm was operating an “advance fee scheme, in which its agents contacted holder of securities that trade over-the-counter. The agents extend an offer to purchase the shares on behalf of an anonymous entity interested in discreetly gaining control of the corporation. The agents also stat that the purchase price will be 150 to 200 times greater than the current trading price. As the negotiations close, RJL agents explained that both the seller and buyer must submit to RJL a percentage of the overall purchase price, which will be returned when the transaction is complete. At least one investor submitted $19,000 to RJL, after which all communications with the firm ceased. According to the complaint, some hesitant investors were encouraged to contact the “International Public Shareholder Protection Service,” in Idaho. This organization then reports to the inquiring investor that they are familiar with RJL and that they have no complaints against them. Other hesitant investors were encouraged to contact “International Trade Services,” which produced similar results, adding that the organization normally only works with the FBI or Interpol and as a result do not have a website. “International Trade Services” also refused to reveal its location due to “ongoing international terrorist threats.” Massachusetts investigators also determined that RJL, which falsely claimed to be registered with the state’s Corporations Division, had provided investors with letters of guarantee from the “Securities Verification Agency,” purportedly of New York. The agency could not be located. Details. For more information, contact Brian McNiff, (617) 727-3548
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