Last week the Security and Exchange Commission shut down a worldwide pyramid scheme that was targeting Asian-American, Hispanic and foreign investors promising high returns for investments from cloud computing services. WCM and WCM777, the companies behind the scheme, raised more than $65 million in 2013. They promised gullible investors that they could double their money in 100 days by investing anywhere from $300 to $1,999 in cloud services. WCM then used some of the new money to pay old investors, a classic Ponzi scheme.
As the cloud industry continues to boom and companies continue to turn into billion dollar behemoths, it is inevitable that shady schemes similar to WCM's Ponzi are bound to become more common. The scams that concern us the most are phony cloud providers who are seeking investments or cloud services that are reselling public cloud and violating agreements in the process. Others will host your data for free as long as they have constant access to it, scary stuff.
The WCM scam targeted individual investors but it is only a matter of time until small businesses and enterprises are being targeted. Deciphering which cloud start up is legitimate may become tricky in the future, after all the cloud is only a concept, there is no hardware or solid product to sell. All it may take is a demo and a convincing sales pitch to bring a client into a scam, which is why it is vitally important to know your cloud provider and make sure you are asking the right questions. We put together a list of questions you should be asking your provider here, make sure you check it out before you buy!
Written By: Sam Watkinson