Financial fraud comes in many forms


Financial fraud occurs when someone else uses deceptive or misleading practices to take or deprive you of assets. These practices can come in many forms. Of all the types of financial fraud, one of the most common is investment fraud.

What is investment fraud?

Broadly, investment fraud is the selling of investments through the use of misleading or false information. In other words, the seller lies or obscures critical information to induce the buyer to purchase the security.

Fraud can also occur if they omit or hid key negative facts about the investment or made untrue promises about returns or some other pertinent aspect of the investment.

Ponzi schemes

Since the Bernie Madoff Ponzi scheme discovery, Ponzi schemes have reentered the popular discourse. Many investors do not realize that these frauds are common because they are easy to start and maintain for short periods. In these schemes, the fraudsters use new investor money to pay returns for old investors.

If new investors bring new capital, the scheme continues. Though just like with the Madoff Ponzi scheme, eventually there are more withdrawals than deposits, and the scheme implodes.

Pump and dump schemes

Pump and dump schemes have become part of our discourse again, too. In these schemes, traders or brokers purchase a cheap stock. Then, they inflate the price by convincing others to buy that stock (the pump). At some point, those that bought the stock when it was low sell (dump) the stock for a considerable profit, while those who bought in late see their stock portfolio’s value tank.

Report fraud immediately

There are several resources for fraud victims in New York. These include the Victim Connect Resource Center (1-855-484-2846), Securities Helpline for Seniors (1-844-574-3577) and the Identity Theft Resource Center (1-888-400-5530). For broker and investor fraud, the Financial Industry Regulatory Authority has a helpline at 1-844-574-3577, and the Securities and Exchange Commission’s fraud has one as well: 1-800-732-0330.

While these agencies can help stop fraudsters, you may need your own attorney to recoup losses.