SEC: Yet Another Social Media Fraud Scheme; Hawaii Woman Charged

recommendedreading1On the same day the SEC announced a civil and criminal prosecution of alleged Florida-based scammers using YouTube to fleece the masses in a Ponzi scheme, it announced it had charged a Honolulu woman who allegedly engineered two fraud schemes through promotions on her own website and Twitter, Facebook and Skype.

Keiko Kawamura’s scams featured the posting of third-party screen shots to create the impression “she was personally obtaining incredible investment returns,” the SEC charged yesterday.

But, the agency alleged, “the account statements were not hers.”

And Kawamura was not really a hedge-fund manager or investment banker, despite her claims, the SEC charged. Rather, “she had virtually no prior trading experience.”

The scam was not limited to social networks, the SEC charged. Kawamura built a myth on her own website and advanced it over Twitter and Facebook.

Subscribers willing to pay “between $94.95 and $174.95” a month received access to “a locked Twitter account that Kawamura used to provide recommendations on when to sell or purchase particular stocks and options,” the SEC said.

On the myth-making front, the SEC charged, Kawamura “claimed on the site that she had ‘been in the Investment banking industry for nearly a decade, specializing in Wealth Management for a major Financial Institution.'”

The reality “at the time she created her website,” however, was that Kawamura “knew this was false,” the SEC charged. “She has never worked in the investment banking industry and has never worked for any financial institutions.”

Her lack of qualifications notwithstanding, Kawamura “also provided all subscribers to her website with access to one-on-one advice over Skype’s instant message service in which she would provide specific recommendations regarding stocks and options to the subscriber,” the SEC charged.

Kawamura netted nearly $50,000 in fees that flowed from 70 subscribers. Beyond that, roughly $200,000 more came in from at least seven investors duped into believing Kawamura was a professional hedge-fund manager, the SEC said.

“Despite her promises to invest the funds she obtained, Kawamura misappropriated much of the money,” the SEC charged. “Of the funds she did invest, Kawamura lost everything in risky options trading.”

Part of the hedge-fund scheme featured the creation of “false tax documents,” the SEC charged.

The highly touted “experience” of the purported hedge-fund manager proved to be that she had placed “a small number of trades over the preceding few months in an account held in her boyfriend’s name and less than $10,000 traded in brokerage accounts held in her name,” the SEC charged.

Where did the money go?

“[L]uxury vacations to Miami and London,” the SEC said.

And after duping investors in that fashion, she launched the subscription service, the SEC charged.

“As alleged in our case, Kawamura used social media to ensnare investors and raise money to support her lifestyle,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “Investors should beware of fraudsters who use social media to hide behind anonymity and reach many investors with little to no cost or effort.”

The SEC’s Los Angeles Office brought Ponzi- and pyramid charges against Phil Ming Xu of the WCM777 “program” last month. WCM777 and companion schemes also traded on social media, including YouTube and Twitter.

Those schemes fetched at least $65 million, the SEC said.

See SEC’s 2012 Investor Alert on Social Media and Investing.

About the Author

Leave a Reply