You’ve probably heard that it’s wise to invest your money. Instead of saving or spending it, investing your money can help ensure you’re financially taken care of throughout your life. That being said, investing in stocks means that you’re going to deal with a certain amount of risk. Unfortunately, certain situations can lead to you thinking you’re making smart decisions while being a victim of what’s known as securities fraud. In this post, you’ll learn about securities fraud and the many ways people commit this crime.
What is Securities Fraud?
The crime known as securities fraud goes by several names. For instance, you might have heard this crime called investment or stock fraud. This crime occurs when someone utilizes deceptive practices in order to cause investors to invest their money based on false or inaccurate information. One of the most notorious people to commit this type of crime is Bernard Madoff. Once the chairman of NASDAQ’s stock exchange, Madoff operated the largest Ponzi scheme in history. Madoff’s scheme allowed him to take a total of $20 billion from his victims. He is now serving a 150 year prison sentence.
3 Types of Securities Fraud to Watch out For
It’s important to understand that securities fraud can take place in several different ways. Therefore, it’s wise to ensure you learn more about the various types of securities fraud. By learning this information, you’ll have an easier time understanding when this type of fraud might be happening to you. With that in mind, here are three types of securities frauds to watch out for.
- Pump and Dump Scams
Many investors feel that the internet makes trading stocks much easier than ever before. Unfortunately, scammers often utilize the internet to prey on their innocent victims. One of the most common types of internet fraud occurs when a pump and dump scam takes place. This type of scam involves having people artificially pump or increase a stock’s price. For instance, a large group of people or automated bots might begin posting on various websites about how others should invest in a certain company. If this works, others will begin purchasing stocks in this company based on this type of false information. After the price of a stock increases to a certain point, scammers immediately begin selling or dumping their shares. If this happens to you, you’ll definitely want to contact a securities fraud lawyer.
- Utilizing Dummy Corporations
You’ll always want to take your time while making investments. Unfortunately, certain fraudsters capitalize on investors who are wanting to make fast profits. These fraudsters will utilize what is known as dummy corporations to take advantage of investors. Dummy corporations are fake businesses that often have names that sound similar to real companies. Next, these con artists make buyers believe they’re investing in a legitimate business while they’re actually making worthless purchases.
- Corporate Fraud
It’s understandable to base your investing information on the performance of a company. However, certain companies have committed corporate fraud on unsuspecting investors. This type of fraud takes place when companies falsify information to make their company look like more of a sound investment than it is. A notable example of corporate fraud took place during the Enron scandal of the early 2000s. In addition to companies committing fraud, it’s also possible for accountants and financial advisors to receive charges for this type of crime. If you suspect that you’re receiving untruthful information from your advisor, you might consider contacting a financial advisor attorney.
To summarize, there are several types of securities frauds to watch out for. If you believe you’re the victim of this type of crime, it’s wise to contact a securities fraud attorney as fast as possible. In turn, you’ll be able to receive legal assistance throughout this understandably stressful time in your life. Research from 2014 found that there 1,639 pending cases of securities and commodities fraud. If you’re unsure whether you need a stockbroker fraud lawyer, it’s wise to schedule a consultation. This allows you to find out if what you’re dealing with qualifies as securities or stockbroker fraud.
