The US Securities and Exchange Commission (SEC) has filed fraud charges against a 20-year-old Kentucky man who raised more than $100,000 (£62,000) in an online investing scheme.
According to the SEC, between May 2002 and February 2003, KC Smith allegedly set up two websites - which have since been taken down - and sent out approximately nine million spam e-mail messages to potential investors promising them monthly returns, which were backed by a phony investment company, Kryer Financial.
Regulators alleged that Smith said the investments were insured by the US Deposit Insurance (USDIC), another entity he had invented. Smith created a website for the USDIC, featuring the SEC's official seal.
The SEC said the money Smith raised through the websites was not invested nor insured and that Smith used the money to pay for his living expenses.
The complaint also alleged that Smith promoted the fictitious investment opportunities in nine million spam e-mail messages and that he took careful steps to conceal his identity, including calling potential investors on disposable mobile phones, using stolen service provider accounts to access the internet, and collecting investor funds through online payment services that maintain payee confidentiality.
SEC spokesman John Stark said that Smith, while neither admitting nor denying the allegations, agreed to a settlement calling for him to repay the $102,554 to the investors and $4,956 in interest. He added that Smith has also agreed not to commit any more violations in the future.
Stark said SEC officials opted not to ask for any further monetary penalties because the commission decided Smith could not afford to pay those penalties.