Securities Fraud: How to Identify Them and What You Should Do If You are A Victim

Caution is always the best guard against fraud in the investment market. If you do not look out for yourself, no one will. Think of the investment market …

Caution is always the best guard against fraud in the investment market. If you do not look out for yourself, no one will. Think of the investment market as a tank full of sharks. One wrong move and you’re somebody else’s dinner, figuratively speaking of course. Therefore, you should always watch out for possible fraudulent opportunities.

However, no matter how cautious you might be, chances of falling into a bad investment opportunity are still present. Should you get yourself into such a situation, always call a business litigation lawyer to help you recover your money.

Understanding the Nature of Securities Fraud

Securities fraud is a menace to the economy. They are such a threat that the FBI has issued a warning on their website alerting everyone about the dangers of blindly investing in opportunities they do not fully understand.

According to the FBI, securities fraud is an umbrella term for a broad assortment of proscribed activities meant to deceive investors or influence the financial markets for the benefit of the perpetrator. Such activities include the following:

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Brief Discourse on Common Securities Fraud

Ponzi Schemes

Perhaps the oldest of all investment frauds, Ponzi schemes, or pyramid schemes work like this: the perpetrator recruits victims asking them to invest with him. In return, the perpetrator promises to pay the victims enormous returns on their investment. Next, the investor recruits new victims in the same manner and uses the funds collected from the new victims to pay the old victims. The cycle continues until the perpetrator cannot recruit new victims, where the Ponzi scheme collapses. Remember Bernie Madoff?

Advance Fee Schemes

If you’ve spent time on the internet for the last decade, these schemes may be familiar to you. At its core, the advance fee scheme is similar to the Nigerian email schemes where perpetrators pretended to be stranded royalty with lots of money overseas. They would request victims for several thousand dollars. The money, they pretended, would be used as processing fees to release their massive amounts locked up in an overseas account. To sweeten the pot, they would email you a picture of a beautiful African girl. Once they received the payment, they would cut all forms of communication.

Similarly, the advanced fee scheme works by requesting victims to send small amounts of money to cover expenses such as taxes or bank processing fees. Once the victim sends the money, the perpetrators disappear.

By now you should have seen a typical pattern. The perpetrators promise a huge reward for what can be considered as a minimal initial investment. This is how most frauds work. They prey on your appetite to make huge amounts of money by doing nothing. So when the deal seems to be too good, always run. Most of the times, you’ll be saving yourself from financial ruin.

There are other warning signs you can look out for. If a person asks you to divulge personal details, such as your Social Security Number, over an email or a phone call, be suspicious. Even banks don’t ask for such details over the phone. 


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