August 24, 2010

SIPC Issues Alert on Check Scam

Con artists presented fake SIPC checks to buy goods and services on Craigslist

The Securities Investor Protection Corp. (SIPC) is warning consumers and job seekers to not accept phony SIPC checks that SIPC says "are presented online or in person by con artists seeking to buy personal goods or engage individuals for work."

SIPC, which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, says the fake checks include an actual SIPC account number that is used only for deposits, not to issue checks. The warning issued Tuesday, August 24, by SIPC was an update to an earlier alert to the public issued May 20.

In over a dozen cases so far, SIPC says in its August 24 release, "one or more individuals have presented the phony SIPC checks to 'pay' for an item on Craigslist or in face-to-face transactions, or to 'pay' for services advertised on Craigslist. The most recent victims were supposed to be engaged as drivers or personal assistants. In some cases, the bad check passer or passers are trying to purchase items or services for less than the face value of the phony check and then asking for the balance in return, or for the balance to be forwarded to a third party."

SIPC President Stephen Harbeck stated in the release that "SIPC does not issue checks of this kind. The public should not accept SIPC checks from any person purporting to buy goods for their personal use or to pay for services."

Many of these phony checks, SIPC says, "arrive in a hand-addressed envelope with a return address in Indiana. Although one victim has stated that the fraudulent check was in excess of $30,000, most checks are $5,000 or less." The release states that no SIPC funds have been stolen in this scheme and that SIPC was alerted to the scheme by consumers who were suspicious of the checks and did not proceed. However, at least one person has been victimized, the release states.

In other SIPC news, the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises plans to hold a hearing in September to assess the limitations of SIPA, a law designed to return money and securities to the customers of failed brokerages. SIPC is charged with implementing SIPA. The hearing comes at the request of Rep. Gary Ackerman (D-New York), the Vice Chairman of the Capital Markets Subcommittee, and builds on provisions set out in the Dodd-Frank Wall Street Reform and Consumer Protection Act. This Capital Markets Subcommittee hearing will be the second in the 111th Congress on SIPA.

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