NEW YORK (MainStreet) Investment scams are thriving on social networks. A scheme promoting quick profits on Facebook and Twitter is the latest to be exposed and closed by authorities. In an emergency enforcement action, the Securities and Exchange Commission shut down a phony investment firm known as Mutual Wealth for operating a bogus trading strategy and pyramid scheme.
Fleet Mutual Wealth Limited and MWF Financial, collectively known as Mutual Wealth, promised investors remarkable returns of 2% to 3% per week using an "innovative" high-frequency trading strategy. Money would be "invested into securities for no more than a few minutes" to achieve the exceptional profits -- and investors could earn even more by becoming "accredited advisors" and recruit new investors.
Rather than implementing the trades, the SEC says the company diverted investor money to offshore bank accounts held by shell companies. Mutual Wealth claimed to be headquartered in Hong Kong with a "data-centre" in New York. Authorities say neither facility existed. Approximately 150 U.S. investors bought in to the scheme in an amount totaling at least $300,000.
"Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money," says Gerald W. Hodgkins, an associate director in the SEC's Division of Enforcement. "Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum."
The SEC's complaint claims that Mutual Wealth operates through entities in Panama and the United Kingdom, with offshore bank accounts in Cyprus and Latvia.
The company aggressively utilized Facebook and Twitter to promote the pyramid scheme and to enlist new "accredited advisors" who would recruit additional investors in order to earn referral fees and commissions.
"Accredited advisors benefit from a three-tiered commission system," the Mutual Wealth website says. "Advisors will earn commission on initial investment sales, an ongoing bonus from profits received by clients that they have referred, and an additional bonus on the number of active clients that were referred by the advisor. Accredited advisors are entitled to their own personal e-mail address at Mutual Wealth, a direct telephone number accessible via our switchboard and a personalized company business card."