Since the days of snake oil salesmen and medicine shows, fraud operators have appealed to consumers' concerns about health, financial security, and social acceptance. Today's con artists are pitching sure-fire cures, easy money, and self-improvement, but they're no longer confined to traditional venues to perpetrate their frauds. The Internet is now mainstream, and it is allowing fraud promoters to mimic legitimate business more convincingly--and reach potential victims more efficiently--than ever. The Internet is quickly becoming the marketplace of choice for a host of deceitful pyramid schemers, bogus work-at-home promoters, spurious health and weight loss claims, and a new generation of fraud that uses increasingly sophisticated technology.

Some fraudulent promoters stick to traditional media to peddle exotic investments, phony magazine and travel offers, and sham invention promotion services. Still others, using fire and police charities as their cover, stay with the telephone to misrepresent that the funds they collect from neighbors and local businesses will go directly to community organizations.

The Federal Trade Commission therefore focused its enforcement and education efforts on novel schemes as well as traditional scams. The FTC filed over 50 cases and orchestrated 11 major "sweeps" with law enforcement partners in other federal agencies and the states. These efforts resulted in an additional 374 state and federal actions. The Commission also worked to achieve greater international cooperation to combat cross-border fraud, step up criminal enforcement against those who violate FTC orders, and broaden its education programs for consumers and business through cooperative efforts with industry organizations, the media, and various Internet groups.

In 1997, cyberfraud accounted for a relatively small percentage of total consumer complaints. But, with electronic commerce burgeoning and the number of people online skyrocketing, it is taking on increasing importance for consumer protection authorities. This report tells the story of the FTC's 1997 experience with fraud in cyberspace: how it occurs and how the agency has refashioned the "tools" of its trade to fight it.