The U.S. Securities and Exchange Commission (SEC) reached a settlement with a 20-year-old Kentucky man who allegedly conned Internet users into sending him money through phony investment Web sites, the SEC said Monday.
The regulatory agency had filed a complaint against K.C. Smith of Oak Grove, Kentucky, charging that he fraudulently raised US$102,554 between May 2002 and February 2003 by promising double-digit monthly returns on two Web sites and in about 9 million e-mail messages, according to an SEC statement.
Without admitting or denying guilt, Smith agreed to pay US$107,510 to settle the case, which was filed in the U.S. District Court for the Eastern District of Tennessee.
Smith allegedly created Web sites for two fictitious investment opportunities. One was called Kryer Financial, offering returns purportedly insured by the United States Deposit Insurance Corporation, or USDIC. Smith made up the USDIC and created a Web site for it displaying the SEC’s official seal.
Smith allegedly covered his operation by calling investors on disposable mobile phones, using online payment services that keep the payee anonymous and accessing the Internet through stolen Internet service provider (ISP) accounts. None of the raised money was invested; Smith spent it, the SEC said.
Last July in the U.S. District Court for the Northern District of Georgia, a K.C. Smith was ordered to pay $25 million to ISP EarthLink Inc. in one of the largest victories against a spammer. He was charged with sending more than 1 billion unwanted e-mails. It couldn’t immediately be confirmed if this was the same K.C. Smith who settled the SEC case.