Phony ‘look alike’ website targets Madoff victims

Tuesday, March 09, 2010

The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund mandated by Congress to protect the customers of insolvent brokerage firms, is today alerting consumers and international regulators about a "look-alike" website for a fictitious organization mimicking the SIPC in an apparent attempt to scam victims of Bernie Madoff, the Wall Street titan who stands accused of massive investor fraud.

The SIPC protects U.S. investors in the event a brokerage firm fails while owing cash and securities missing from customer accounts. The SIPC acts as trustee or works with an independent court-appointed trustee to recover funds in cases of brokerage insolvency.

The so-called “International Securities Investor Protection Corporation (I-SIPC.com)” copies several aspects of the SIPC website design and graphics. It is soliciting Madoff victims to submit claims, which the SIPC warns could result in “phishing” or other identify theft frauds. The phony group claims to be based in Geneva and that it has ties to the United Nations and the International Monetary Fund, among other deceptions.

In one section of the bogus website, the group includes a "testimonial" from a Madoff victim who is reported as having received funds from the organization. In a link from its homepage, a story illustrated with a photo of a huge stack of U.S. money states falsely that the so-called I-SIPC has collaborated with Interpol to recover $1.3 billion in Madoff money from a hideout in Malaysia.

SIPC President Stephen Harbeck explained, "We know from information provided to us by individuals that this bogus group is already attempting to obtain funds and confidential financial information from investors in the U.S. The SIPC wants to be as clear as possible that Madoff victims and other investors should not share any personal financial information via this website or rely upon it as an information source. We intend to use every available means to shut down this illicit operation.”

Harbeck said that SIPC recently became an ancillary member of the International Organization of Securities Commissions (IOSCO) and will publish a related international alert through that organization. He added that the SIPC is determining whether the scammers violated the SIPC trademark and if so, the SIPC will prosecute violators. He said the SIPC has moved aggressively in the past to protect its trademark and website against similar intrusions that could be used to mislead or even swindle investors. In 2004, the SIPC got law enforcement involved when it identified a “look-alike” website seeking to defraud investors. In 2007, the SIPC prevailed in arbitration proceedings after an organization sought to register and use the sipc.com (instead of sipc.org) web domain.

The federal statute that created the SIPC provides for customers of a failed brokerage firm to receive all non-negotiable securities—such as stocks or bonds—that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000, with a maximum of $100,000 on claims for cash. From the time Congress created the SIPC in 1970 through December 2008, the agency has advanced $520 million in order to make possible the recovery of $160 billion in assets for an estimated 761,000 investors.