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Social Media and Securities Fraud: The FBI Turns to Twitter

With the massive resources available to the FBI and Department of Justice, it should come as no surprise that federal authorities are opening a big new door in their search for fraud cases. Reuters is reporting that the FBI is focusing a new investigative effort on Twitter and other social networks.

The FBI considers securities fraud and insider trading to be ever-increasing problems, especially in the hedge fund industry. Investigators apparently see Twitter and other networks as a new opportunity to find tips and spot illegal conduct. With more and more investors, businesses and commentators using Twitter to stay in close communication, the FBI believes that it is "a potential breeding ground" for fraud cases.

Despite the FBI's frequent advantages in prosecutions, government investigators have always struggled to keep up with new business trends. Normally, the FBI is in the position of responding to patterns only after numerous cases have established that they exist. This might represent an attempt to jump ahead in this area, preemptively putting agents in a position to spot tips before a notorious pattern develops.

This strategy might raise novel legal questions as cases start to emerge based on evidence from social media sites. Like investigators, the law often finds itself behind the current state of technology. For defendants, this creates dangerous and unknown risks - it is important to consult a defense lawyer with enough experience to navigate shifting and unpredictable prosecutions.

Source: Reuters, "FBI uses Twitter, social media to look for securities fraud," Matthew Golstein and Jennifer Ablan, Nov. 28, 2012

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