SEC Charges Honolulu Woman For Defrauding Investors Through Social Media Scam

Stephen Little

9 April 2014

The Securities and Exchange Commission has brought fraud charges against a Honolulu, HI, woman for posing as an investment banker and soliciting investors through social media.

The SEC alleged that Keiko Kawamura engaged in two separate fraudulent schemes to raise money from investors while acting as an investment and hedge fund expert - when in fact she had virtually no prior trading experience.

From December 2011 through June 2012, Kawamura offered and sold interests in a self-described hedge fund and posted on Twitter screenshots of brokerage account statements suggesting she was personally obtaining incredible investment returns.

The SEC said that Kawamura told investors that she would pool their funds in a single brokerage account, in which she would invest in stocks and options. Kawamura told investors that she would be compensated by receiving 20 per cent of any profits. In total, Kawamura raised approximately $200,000 from at least seven investors.

Despite telling investors that she would invest all of the funds she raised in stocks and options, Kawamura misappropriated much of the hedge fund’s money to pay for her living expenses and luxury vacations to Miami and London, the SEC said. Of the approximately $55,000 Kawamura did invest, she pooled the money in one brokerage account and lost it all in highly risky options trades.

In the second instance, Kawamura started a website in August 2012 called kawamurafinancial.com, which she promoted primarily through social media, including Twitter and Facebook.

She used the site to attract investors to her subscription service for investment advice and falsely told subscribers that she had been in the investment banking industry for nearly a decade and had achieved 800 per cent returns in her personal brokerage account.

In fact, as Kawamura knew at the time she created her website, she had lost all of the money in her personal IRA brokerage account over a period of two months in 2012.

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

The case comes at a time when there are growing concerns about the fraudulent use of social media in the financial industry.

Social media has become a key tool for US investors as people increasingly turn to sites such as Facebook, YouTube, Twitter and LinkedIn for financial advice and information to help them make investment decisions. However, while social media can provide many benefits to investors, it can leave them open to prey from fraudsters.

Social media offers a number of attributes criminals may find attractive and allows fraudsters to contact a large number of people at a relatively low cost. Nowadays, it is relatively easy to create a website or email that looks and feels legitimate, giving criminals a better chance to convince investors to part with their money. Social media is also attractive to fraudsters as the anonymity of the internet makes it harder for them to be tracked down.

Last week, the SEC released new guidance on the use of social media for advisors. Under the new guidance, financial advisors will be able to link to third-party websites as long as they include positive and negative reviews.