3 Dangerous Types of Securities Fraud


Many people wisely invest their money in order to prepare for the future. For many, investing is a relatively safe and wise way to increase their income. Unfortunately, not every investment is all it’s cracked up to be. Throughout the investing world, there are scammers looking to profit off of other people’s earnings. In this post, you’ll learn more about the various types of securities fraud.

Understanding Securities Fraud

You might have heard of securities fraud otherwise known as stock or investment fraud. Many litigation attorneys have been involved in cases where this type of fraud occurs. In most cases, securities fraud occurs when investors make buying or selling decisions based on false information. Of course, the investors are unaware that this information is false. Companies are required, by law, to report accurate information. In fact, statistics gathered from 2014 found that there were 1,639 separate pending cases involving securities and commodities fraud.

Various Types of Securities Fraud

To gain a further understanding of securities fraud, it’s important to learn the many ways this crime takes place. People from all walks of life can quickly become victims of securities fraud. Considering that, learning what types of fraud exist is beneficial to learn. With that in mind, here are three types of securities fraud.

Corporate Fraud

Statistics from 2014 found that there was an annual total of 633 pending corporate fraud cases. Corporate fraud or misconduct occurs in several ways. The main way this takes place is when companies fail to report factual company information to investors. Investors from across the world make their decisions based on company information. If a company posts drastically declining earnings, it’s likely that investors will steer clear of this business. Unfortunately, deceptive individuals know this and might resort to giving out false information. After this happens, investors see the false earnings as a sign of a growing company. In many cases, investors are aware of this problem after they’ve already lost considerable amounts of money. Corporate fraud also occurs when someone creates a dummy company. Dummy companies are fake businesses designed to look profitable and enticing to investors.

Pump and Dump Scams

The internet makes researching and trading stock easier than ever. That being said, there are also plenty of scammers ready to take advantage of unknowing investors. This is often done through pump and dump scams. This form of internet securities fraud is a multi step process. First, false information is sent throughout the internet by scammers. This information is often presented in online forums, chat rooms, and emails. This information is designed to false inflate or pump up the value of a stock. As a stock’s value increases based on false information, scammers sell their share before anyone else knows what’s going on.

Ponzi Schemes

You’ve most likely heard of a Ponzi scheme thanks to the name Bernard Madoff. This man was once so important in the financial world that he served as the chairman of NASDAQ’s stock exchange. A Ponzi scheme occurs when investors believe they’re placing their money into a profitable venture. Unfortunately, payments made to these investors don’t come from a successful company. Instead, these payments come from newer investors who are also being scammed. Madoff’s Ponzi scheme would grow to become the largest of its kind. Bernard Madoff scammed victims to the tune of $20 billion in losses. Madoff is now in prison serving a 150 year sentence.

In closing, securities fraud is a crime that happens in several ways. If you suspect that you’re a victim of this crime, contact a securities fraud lawyer. Your money is valuable, don’t let scammers take you for granted. While no court case is ever a guaranteed win, it’s important to have a securities fraud attorney on your side. Securities fraud rules are often difficult to understand for those who don’t practice law. Considering that, a stockbroker fraud lawyer will work to ensure that you receive the justice you’re seeking.

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