The Texas State Securities Board is warning investors about a growing number of online investment schemes in which bad actors impersonate registered, licensed firms. These impersonation schemes are growing more and more sophisticated as scammers more efficiently leverage technology to defraud the public. Investors need to be aware – and beware – of these schemes.
Earlier today, for example, Securities Commissioner Travis J. Iles entered an emergency cease and desist order against Oscar Hill, accusing him of operating an impersonation scheme. According to the order, Hill registered an internet website for Prestige Assets Mgnt, LLC – an unlicensed dealer with a similar name to Prestige Asset Management, LLC, a registered investment adviser. The phony website used a domain name substantially similar to the domain name for the real website operated by the registered firm – an unfortunately common attempt to trick the public into dealing with an imposter.
“These imposters not only threaten our Texas investors but also create reputational harm for our registered community,” said Commissioner Iles. “Investors need to be ever-vigilant when considering potential investments through electronic devices.”
The phony website appeared legitimate, according to the order. It even appropriated identifying regulatory information – the Central Registration Depository Number or CRD Number - for the real Prestige Asset Management, LLC, and a map to its office.
“The internet provides a wealth of tools to scammers,” said Enforcement Director Joe Rotunda. “The scammers are taking advantage of these tools. They’re using every trick in the book to appear legitimate – even masquerading as regulated firms and registered dealers.”
The tactics typically vary from case to case and scheme to scheme. For example, in certain instances, scammers may impersonate a popular financial professional or issuer. Commissioner Iles highlighted this issue last month when he filed an emergency cease and desist order against Keye Midas Wealth Management Worldwide. This action accused a party of perpetrating a bait-and-switch scheme by pretending to be affiliated with ARK Invest and the ARK Innovation ETF. Shares issued by ARK Innovation ETF are listed on the NASDAQ and recently generated widespread retail interest.
Commissioner Iles has brought other cases, such as an action against Raymond Hill and Mark Diaz for promoting an advance fee scheme by impersonating a federally-registered investment adviser – using a fake website and social media, forged documents, and purported affiliations with the Internal Revenue Service. In another recent case, Commissioner Iles accused Amage Trades and an affiliate of adopting aliases substantially similar to the names of registered parties and publishing online photographs that purported to depict registered parties. This order alleged the parties even registered an internet domain name that was strikingly similar to the internet domain name of a registered party – differing by only one of 24 characters.
The Texas State Securities Board is recommending investors consider the following information when dealing with purportedly registered parties through online platforms:
- Anyone can be anyone on the internet, and investors should remember scammers are using fake social media accounts to obscure their identities. Texans should take steps to identify phony accounts by looking closely at content, analyzing dates of inception and considering the quality of engagement. The Better Business Bureau has released additional tips for spotting these fake accounts.
- Scammers are attempting to trick investors by registering domain names for fraudulent websites that are very similar to domain names for real websites. Investors should always pay careful attention to domain names for internet websites.
- Texans should independently research the registration of investment firms. They should not use hyperlinks provided by the parties and instead directly contact the Texas State Securities Board or search FINRA’s brokercheck platform.
- Registered parties are required to truthfully disclose all material facts, and they must disclose the risks associated with each product. On the other hand, bad actors will often minimize or conceal risks, and instead use hyperbole to tout profits and payouts. Investors should pay attention to these details, as they can provide clues about the potential illegitimacy of a scam.
- Bad actors may be impersonating licensed parties by using phony websites that place viruses or malicious software on victim’s computers. Investors should continue to embrace cybersecurity.
Please contact our enforcement program if you believe you have been the victim of an impersonation scheme or any other fraudulent securities scheme. We are available by telephone at 512-305-8392 or email at email@example.com.