The bad news is that the Mafia is using the Internet to manipulate share prices. The good news is that the Mob is doing it on a comparatively small scale.

When prosecutors, investigators and securities regulators announced the largest US securities fraud crackdown ever on Wednesday, they offered an insight into the modernisation of the Mob, its use of new technology to lubricate old frauds, and its links with the sleazy side of Wall Street.

The list of companies and stocks that federal officials claim were manipulated by the Mafia-led group is still predominantly old economy. It includes businesses recycling roofing shingles, a publisher of magazines about the casino industry and a fastfood chain selling grilled chicken sandwiches.

But at the same time, according to the indictment, the five New York organised crime families involved have begun to branch out into Internet-related fraud, using the Web to manipulate the prices of low-priced "microcap" stocks.

The interest of organised crime was bound to be aroused by a combination of rampant speculation and a credulous public that, until recently, mobsters found mainly at the racetrack or the casino. As Ms Mary Jo White, US attorney for the southern district of New York, puts it: "They go wherever the money is."

The extraordinary prosperity created by the equity bull market has spawned a range of criminal indictments. The scope of the latest fraud said to have taken place over the past five years was greater, however. Ms White, the FBI, and the Securities and Exchange Commission claim to have linked 120 people, including Mob figures, business executives, brokers and a former police detective. The 104 arrests could be the largest number in a criminal case of any kind, federal officials say.

Even so, the overall scale of the scheme was pretty small, both by comparison with other white-collar crime perpetrated on companies in the late 1990s and with the legitimate profits made on Wall Street.

According to the indictments and criminal complaints, the combined fraud resulted in losses of more than $50 million (€52.47 million). Compare that with the $13 billion knocked off the value of Cendant, the franchising and marketing company, when it revealed an accounting fraud in 1998.

Federal officials identified three main scams allegedly perpetrated by the group:

manipulation of publicly traded securities - breaking Securities and Exchange Commission (SEC) rules by buying large blocks of microcap stocks, then artificially pumping up demand before selling at a profit;

union pension funds fraud and kickbacks - allegedly planting corrupt managers at union pension funds and arranging to divert part of the funds to corrupt union officials and members of the illegal enterprise;

private placement fraud - allegedly arranging for the private placement of stock with investors before siphoning 50 per cent of the proceeds back to corrupt brokers in the form of secret sales commissions.

Simultaneously, US regulators said, the Mafia-led group was using a network of Internet-based newsletters and stock-promotion sites to manipulate prices.

The fact that the Mafia-led alliance allegedly controlled DMN Capital Investments, a small investment bank, may be the most worrying element of the case. But regulators and Wall Street professionals doubt that the allegations, even if proven, will irreparably damage the US financial services sector.

Securities watchdogs appear confident that the Mob has limited its activity to microcaps, which tend to be ignored by legitimate Wall Street firms and market watchdogs. Microcap shares list in the loosely regulated over-the-counter market, where small, new companies are given the chance to raise seed money with a minimum of regulation.

Regulators say the arrests are likely to uncover further microcap fraud.

Securities industry officials have been quick to point out that legitimate Wall Street firms often identify abuses in the markets as part of a "zerotolerance" policy. They said the fact that this had been unearthed showed the policy works.

For the time being, it looks as though the Mob still has a lot to learn about using the latest tools for exploiting gullible investors.