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Posted by Mark Pugsley.

On January 4, 2012 the SEC charged Anthony Fields, Anthony Fields & Associates and Platinum Securities Brokers, with selling $500 billion of fraudulent securities through LinkedIn and other social media websites. For example, according to the SEC he used LinkedIn discussions to promote fictitious “bank guarantees” and “medium-term notes.” The postings resulted in interest from multiple purported potential buyers.

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One of the interesting things about this case is that nobody actually purchased the stock and nobody lost any money. The SEC shut this one down before it even got started, which is unusually proactive in my experience.

As reported by Joelle Scott last week in Forbes Magazine, even though Fields relied on social networking sites to spread his scam yet did not realize that inherent in these websites is the ability for investors to talk to each other:

“Maybe, just maybe, through a little public record digging, an investor saw that Anthony Fields has filed for bankruptcy protection twice (in 2002 and 2003) and has had numerous state and federal tax liens filed against him over the years and in 1995 was charged with failure to pay income taxes (a Class A felony). Maybe that investor talked to another investor who realized this wasn’t the best CV for a public accountant (which Fields was) and if someone had this many financial problems then maybe their motive for selling securities was jaded.”

And, perhaps, once all of the investors pooled their information, they realized that Fields cannot be the omniscient Wizard of Oz: both a CEO of his company and its Chief Compliance Officer, as he states on his firm’s Investment Adviser Registration on file with the SEC. This is the ultimate meddling of financial church and state: you cannot be both head of the firm and head of the firm’s compliance. Pick one. Also, as the SEC claimed in its announcement last week, Fields represented himself as a broker dealer yet he was not registered as such with FINRA. Investors heeded all of these warning signs and did not indulge Fields’ nonsense on social networking sites. It is refreshing to see the SEC get out in front of this one (who knew we would ever say that without a smirk?).”

In connection with this filing the SEC also issued a number of releases for investors to warn them about the increasing use of social media by individuals seeking to perpetrate fraud through social media. The new Investor Alert is titled “Social Media and Investing: Avoiding Fraud” and seeks to help investors be better aware of fraudulent investment schemes that use social media, and provides tips for checking the backgrounds of advisers and brokers. The SEC also issued a new Investor Bulletin titled “Social Media and Investing: Understanding Your Accounts” which contains best practices to help social media users protect their personal information and avoid fraud.

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