Sometimes it seems like the phrase "savvy investor" is an oxymoron. After all the times people have been duped by Ponzi schemes and Nigerian scams, they still fall for similar cons. But some investors recently found a way to lose their money with a real bang.
It's the case of the .44 Magnum Leveraged Financing Program.
Some 70 investors gave fake financial firm Dresdner Financial $5.77 million based on a pitch that was much too good to be true. According to the SEC:
"[T]he Magnum Program offered guaranteed profits through a process that involved leasing and monetizing bank instruments. Although the timing and amount of the promised payouts varied, many of the contracts that the Defendants entered into with the investors stated that an investment of $44,000 would yield a return of $2 million after 10-12 banking days."
No surprise, those were empty promises. The rest of the case has a plot line that could have been lifted from the pages of a dime novel. Geoffrey H. Lunn, a defendant in the SEC's case, is accused of giving more than $1 million to "a one-eyed man who used the alias Robert Perello," the scam's putative kingpin, according to the New York Observer. Perello's cronies were reportedly handsomely rewarded, and the cyclops spent nearly a million bucks on call girls in Sin City.
This was an investment stick-up at its most brutal. And worse, it was intended to be. In its filing, the SEC notes: "According to Lunn, Perello told Lunn in the fall of 2010 that he named Dresdner's program the Magnum Program because 'when people found out they'd been ripped off, they would buy a .44 Magnum and shoot themselves in the head.' "
All we at DailyFinance can say is, when an "investment opportunity" seems too good to be believed, be extra careful before you pull the trigger.
Also on DailyFinance:
9 Scary Ways Criminals Use Facebook
.44 Magnum Investment Scam Was Intended to Be a Real Killer
When criminals hack a Facebook account, they typically use one of several available "brute force" tools, says Grayson Milbourne, Webroot's manager of threat research for North America. These tools cycle through a common password dictionary, and try commonly used names and dates, targeting hundreds of thousands of different email IDs. Once hacked, an account can be used as a platform to deliver spam, or -- more commonly -- sold. Clandestine hacker forums are crawling with ads offering Facebook account IDs and passwords in exchange for money. In the cyber world, information is a valuable thing.
Commandeering occurs when a criminal logs on to someone else's account using an illegally obtained ID and password. Once online, they have the victim's entire friend list at their disposal and a trusted cyber-identity. The impostor can then run a variety of confidence schemes, such as the popular "London scam," in which the "friend" claims to be stranded overseas and in need of money to make it home. The London scam has a far higher success rate on Facebook -- and specifically on commandeered accounts -- because there is a baseline of trust between users and those on their friends lists.
Profile cloning is the act of using unprotected images and information to create a Facebook account with the same name and details of an existing user. The cloner then sends friend requests to all of the victim's contacts, who will likely accept them, as they appear to be from someone they know. Those accepted friend requests give the con artist access to his new "friends'" personal information, which can be used to clone other profiles or to commit fraud.
As Grayson Milbourne puts it, "Exploiting a person's account and posturing as that person is just another clever mechanism to use to extract information." Perhaps what's scariest about this kind of crime is its simplicity. Hacking acumen is unnecessary to clone a profile; the criminal simply needs a Facebook account.
Cross-platform profile cloning is when a cyber criminal obtains information and images from Facebook and uses them to create false profiles on another social-networking site, or vice versa.
Because the profile is often cloned to a social networking platform that the victim doesn't use, this kind of fraud may also take longer to notice and remedy.
Phishing on Facebook usually involves a hacker posing as a familiar individual or respectable organization, and asking for a user's personal data, usually via a wall post or direct message.
Often, users will be directed to click on a link. Once they do so, their computer may be infected with malware, or they may be directed to a website that offers a compelling reason to divulge sensitive information.
A classic example would be a site that congratulates its victims for having won $1,000 and prompts them to fill out a form to collect their prize -- a form that requests credit card, bank account or Social Security numbers, which can then be used by the fraudsters.
Also becoming increasing common, warns Milbourne: "spearphishing," a practice that uses the same basic idea but targets users through their individual interests.
In this common con, the scammers direct users via some sort of clickable enticement to a convincing, but spurious, Facebook log-in page. When the victims enter their usernames and passwords, they are collected in a database, to be used by the original scammer or resold to other criminals.
Once scammers have a user's login information, they can take advantage of the identity through apps like Facebook Marketplace. Posing as a reputable user lets the scammer capitalize on the trust that his victim has earned to sell fake goods and services, or promote brands they have been paid to advertise.
In affinity fraud, con artists assume the identities of people in order to exploit the trust of those close to them to steal money or information. Facebook facilitates this type of fraud because people on the social network often end up having a number of "friends" they actually do not know personally and yet implicitly trust.
Criminals can infiltrate a person's group of friends and then offer someone deals or investments that are part of a con. They can also assume an identity by hacking into a person's account and asking their friends to wire them money, or give them sensitive information like a Social Security or credit card number.
Few sites provide an easier source of basic personal information than Facebook. While it is possible to keep all personal information on Facebook private, users frequently reveal their email addresses, phone numbers, addresses, birth dates and other pieces of private data. As security experts and hackers know, this kind of information often finds its way into passwords or answers to "secret" security questions. While the majority of unprotected information is mined for targeted advertising, it can be a used for more pernicious ends such as profile cloning and, ultimately, identity theft.
Most mass email advertisements are legal, if annoying. However, the growth of social networking has allowed for a new kind of spam called clickjacking. Clickjacking uses an advertisement for a viral video or article as an inducement to click on a link. Once clicked, the link sends the user to a page that tricks them into taking actions that they don't realize they are doing, such as sending an advertisement to all their friends' walls, buying an item via a concealed page, or revealing personal data. This has become such an issue for Facebook that earlier this year, the company teamed up with the U.S. Attorney General to try to combat the problem.