DFSA busts online fraud ring

Arrests are made in an worldwide scam that has cost investors $600,000 and may still be operating.
DFSA busts online fraud ring
By James Bennett
Thu 15 Feb 2007 02:00 PM

The Dubai Financial Services Authority (DFSA) has smashed an international online mirror fraud ring in just six weeks, but at the cost to worldwide investors of US$600,000 and rising, according to its CEO.

David Knott, chief executive of the DFSA, told Arabian Business that the financial regulator had requested a live video link up with the Honourable Sir Anthony Evans, Chief Justice of the DIFC Court last night and that he had called for an "urgent meeting" that went "deep into the night".

Sir Anthony obtained injunctions in the Dubai International Financial Centre (DIFC) Court against Saudi/Jordanian national Husam A Abu-Amara and Globalstar Telecom & Technology and other "unnamed parties", for their involvement in a fraudulent internet investment or mirror scheme so-called because the fraudsters copycat existing websites.

The orders obtained relate to closing down the operation of fictitious websites including the Dubai Options Exchange, the United Arab Emirates Commodity Futures Board and Cambridge Capital Trading that were claiming to offer financial services within the DIFC. The orders also relate to internet service providers (ISPs), however Knott said that the ISPs in question, including host ISP ‘godaddy' based in Arizona in the US, were "not suspected of knowingly participating in the scheme".

Knott and Niall Coburn, director of enforcement at the DIFC, said that "at least US$600,000" had been "scammed" from unsuspecting investors based mainly in Singapore and Australia. Worringly, however, Knott added that the websites in question would still be "up and running" for the next few days as it would "take time" to close them and that "more money could be lost" at the hands of the frausters.

"At this stage we cannot be certain about the size of the scam or investor losses, but we know that approximately US$600,000 has passed through a bank account set up by these fraudsters in Malaysia. We hope that our actions have prevented any further substantial losses to the public. Our investigations are continuing."

The DFSA's application stated that the defendants had "falsely represented that the Dubai Options Exchange and the United Arab Emirates Commodity Futures Board existed in the DIFC and that DFSA Authorised Firms were members of the Dubai Options Exchange and could trade currency options on behalf of investors," a statement read.

The fraudulent scheme targeted investors who were cold called by representatives of Cambridge Capital Trading who then directed investors to these false websites and asked for funds to be transferred into a bank account in Malaysia.

The DFSA conducted a joint investigation with the Emirates Securities and Commodities Authority (ESCA) and the Dubai Police, and worked closely with other international regulators such as the UK Financial Services Authority, US Securities and Exchange Commission to Australian and Securities Investments Commission and the Malaysian Securities Commission. In addition to the injunctions, the Dubai Police have arrested an unnamed individual in connection with the fraud. His passport has been confiscated and his case referred to Dubai Prosecutions. Knott added: "This was a carefully planned scam using advanced technology to convince investors that the fictitious Dubai Options Exchange was a legitimate entity within the DIFC. The perpetrators took great care to construct realistic documents to fool investors and to conceal their identities. They even invented a fictitious regulator called the UAE Commodity Futures Board to give comfort to investors."

The investigation is continuing.

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