Four common investment scams

Getting swindled can be an adverse situation to overcome. You thought you were making a wise choice that could positively affect your financial future, instead a wise-talking investment scam artist manipulated you.

Now, you’ve put up money for a debatable investment – or no investment at all, and in most cases, that money is gone forever and won’t be aiding you in your quest toward a more secure financial future.

Securities litigation may be necessary for these abuses

With any type of investment, there is usually an opportunity for losses. Most New York investors understand this and take careful precautions to minimize potentially significant losses. However, those losses can sometimes be attributed to things outside of the nature of investing. For people who have suffered financial losses because of another person's wrongful actions, securities litigation could help recover some of those damages.

Companies of all sizes and reach can be engaged in securities abuses. Common abuses include fraud and market manipulation. Allegations of company fraud usually relate to inaccurate or undisclosed relevant information, such as accounting practices, financial statements, takeovers and more. Market manipulation is when a company engages in activities that promote false impressions of its security, price movement or trading activity. Both of these abuses can lead to serious financial losses for investors.

New York man charged with securities fraud

Investors allege that a New York man defrauded them out of significant amounts of money. This is despite his personal claims of investing success in relatively little time, but investigators say that the man admitted some of the alleged fraud to at least two investors when they tried to get their money back. He was recently charged with wire fraud and securities fraud.

According to authorities, the 70-year-old claimed that he had managed to generate returns of 362% through day trading in under five years. However, those claims may have been exaggerated or possibly fabricated. Investigators believe that the man actually engaged in very little trading and, when he did, frequently lost money.

What is a Ponzi scheme?

A Ponzi scheme is a faulty investment opportunity proposed by a company or individual. Ponzi scheme investors are assured they will receive a large profit with little to no risk—they do not know that it is a scam.

How does a Ponzi scheme work?

Remember these securities fraud red flags

Once you become familiar with an activity, it’s easy to start overlooking the simple things as you chase the promise of a big win. You always want to do your due diligence. This is especially true when investing in the securities market, where big sums of money can be at stake.

Consider this: The median loss for securities and investment fraud offenses in 2017 was more than $2.1 million. Fraudsters know this and will do everything they can to get your money. Help protect yourself by taking a moment to go over a few investment fraud red flags.

Avoiding broker misconduct charges starts with this

Both investors and brokers have certain responsibilities when working with one another. However, since it is often presumed that New York brokers have more knowledge and experience when it comes to investing, some investors might blame brokers when things do not go as they wish. Since this could result in a professional being accused of broker misconduct, it is important to understand the responsibilities of both parties.

Before entering into a relationship with a broker, an investor should learn about investing, educate him or herself on related risks and should research a chosen broker and securities firm before working with those professionals. Investors must also be certain to provide complete and wholly accurate information to brokers, and should carefully listen and respond to relevant questions. For those who are new to investing, it may come as a surprise that an investor has many more responsibilities than simply selecting an appropriate broker and going on with his or her day.

Advisers reprimanded for selling unsuitable investments

Investing is a smart idea for building additional income streams and building up savings for important things, like retirement and traveling. Making the right decisions regarding investing can be difficult though, which is why people in New York often turn to professionals. Sadly, not all professional investment advisers have their clients' best interests at heart, which can lead to costly and unsuitable investments.

An out-of-state investment adviser was recently suspended after he sold unsuitable investments to his clients. His suspension started on June 6, 2019 and will last for a period of 90 days. The unsuitable investments were stream-of-income investments, which are high-risk. He apparently did not warn his clients of this because he claims that he did not even fully understand the complex nature of such investments.

Red flags to spot broker misconduct

Stock trading is a highly regulated industry. Brokerage firms have several compliance methods in place to assure you that your money is being invested both wisely and legally. That said, it is possible for some misconduct to slip through the cracks.

It is important to have a trusting relationship with your broker. He or she is a party to your trades and, in some instances, may be in control of thousands of your dollars. For that reason, it is crucial that your broker is operating both under your recommendations and within the law.

Lyft to face securities litigation

By now, those who have not personally used a ridesharing app have probably at least heard of one, such as Uber or Lyft. While these ridesharing programs are certainly popular among many people in New York, they are not without controversy. Lyft is currently dealing with securities litigation for allegedly making misleading claims.

A lawsuit alleging securities fraud was recently filed against Lyft. The suit claims that Lyft made misleading and inaccurate claims regarding its business when it filed to go public. The company also allegedly failed to disclose safety and labor issues that it knew about. Information regarding safety issues regarding more than 1,000 recalled bicycles was also left out according to the shareholder lawsuit.

Contact Timothy J. Dennin

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