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Charges Settled in Alleged Spam Scam

May 13, 2003|From Bloomberg News

A 20-year-old high school dropout raised $102,554 for two phony companies by sending out 9 million spam e-mails and claiming that a bogus federal agency was guaranteeing the investments, securities regulators alleged Monday.

K.C. Smith of Oakville, Ky., settled civil charges by the Securities and Exchange Commission that he falsely guaranteed investors double-digit monthly returns in phony companies called the Maryland Investment Club and Kryer Financial.

Smith sought to avoid detection by calling potential investors on disposable cellular telephones and collecting funds through online payment systems that promised confidentiality, said John Reed Stark, the SEC's chief of Internet enforcement.

Smith didn't admit or deny the allegations. He couldn't be reached for comment.

As part of the alleged scam, Smith promised potential investors that their money would be guaranteed by the fictitious United States Deposit Insurance Corp., the SEC said. Smith created a Web site for the supposed insurer and placed a copy of the SEC's official seal on each of the Web pages, the SEC said.

The fictitious name is similar to the Federal Deposit Insurance Corp., the government agency that protects U.S. bank deposits.

Smith carried out the fraud between May 2002 and February, the SEC said. He used the funds collected from investors to pay his personal expenses.

Under the settlement, Smith agreed to refrain from securities law violations and to return the investor funds, along with almost $5,000 in interest, for a total of $107,510, the SEC said.

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