In a coast-to-coast crackdown, the Securities and Exchange Commission has brought 23 actions against Internet fraud.
The suits, filed Tuesday and Wednesday in a handful of states, accuse 44 people and companies of artificially inflating stock prices and, in some cases, promptly dumping them for a profit. The violations of federal securities laws occurred in junk e-mail, on-line newsletters, message board postings, and on Web sites, the SEC said.
Though the SEC has filed suits against Internet fraud, this is the first time the agency has done so on a national scale, a spokesman said. The agency wants to make clear that the Internet is not a "sanctuary" for fraud, he added.
The growth in the number of Internet users has given con artists a wider pool of potential victims.
Observers said that the SEC's action should alert banks that sell securities, letting them better serve customers.
"Hopefully they will be able to provide adequate information and adequate disclosure to their customers so they can make an informed investment decision," said Matthew J. Nestor, who heads the North American Securities Administrators Association Inc.'s committee on enforcement. Mr. Nestor is Massachusetts' chief enforcement officer.
The umbrella organization for state securities' regulators recently created an e-mail address for concerned investors to report suspected securities fraud.
"Even with cops on the street, you need a deadbolt on your door to protect yourself. The same goes in cyberspace," Philip Feigin, the group's executive director, said in a prepared response to the SEC's actions.
The SEC suits involve more than 235 small companies whose share prices were artificially pumped.
The SEC alleged that the promoters lied about the so-called microcap companies or their ties to them or failed to disclose that they were being paid for their endorsements.
In one suit, the SEC claims that an Internet newsletter recommended stocks to more than 100,000 subscribers and visitors, but did not adequately disclose that it was being paid more than $1.6 million for the publicity.
In another case, the SEC said an Internet service touted shares of a company whose stock it owned and promptly sold those shares after the stock price rose.
The suits were filed in Atlanta, Boston, Chicago, Denver, Fort Worth, Los Angeles, Miami, New York, Philadelphia, Salt Lake City, and Washington.
