US crack down on internet fraud schemes

The US Federal Trade Commission has shut down an internet pyramid scheme that defrauded consumers out of $2.9m. The action followed a strenuous investigation into Five Star Auto Club Inc. which operated a web site offering great incentives, in particular an individual's “dream vehicle”, in return for small payments.07 Jul 2000

The Federal Court ruled that the scheme worked in such a way that consumers very rarely received the rewards offered by the web site. Last month it issued a final order which prohibits the individuals responsible for the web site from ever running a pyramid or multilevel marketing strategy again. They were also ordered to repay the $2.9m that they had fraudulently obtained from consumers using their web site.

Other recent actions brought against misuse of the internet include the US Securities and Exchange Commission shutting down a fraudulent “virtual stock exchange”. That incident led to charges against 120 people in 11 different states.

Concerns over the threat of such ploys to consumers are highlighted by the National Consumers League which seeks to protect consumer interests. They have released figures showing that more than $3.2m was lost through internet fraud last year.

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