Investment fraud generally, and hedge fund fraud specifically, can be devastating for investors. Investors who have staked their retirement or life savings on a hedge fund, for example, can unexpectedly face having the rug pulled out from under them if they are victims of this type of fraud.
A variety of legal protections are in place to help protect victims of investment and securities fraud.
Potential signs of hedge fund fraud
Because of the serious impact of investment fraud and hedge fund fraud, investors and potential victims should know what to watch for. Possible warning signs of hedge fund fraud can include:
- A prior history of investor complaints or litigation
- Hybrid investment products or exotic investment vehicles
- A concentration of investments that are difficult to value or illiquid
- Pressures to invests or assurances of complete safety in investing
- The absences of routine or regular audits from an outside accounting firm
- Unusually good performance over the long term, especially in a market that is poor
- A lack of transparency
- Failure to properly disclose material facts, especially when the failure to do so was intentional
- A lack of trading independence
- Managers who trade on their own accounts
Securities fraud can devastate all that victims have worked for their entire lives. It can potentially leave them with nothing and feeling vulnerable. Those who engage in investment fraud should be held accountable which is why victims of hedge fund fraud and other forms of investment fraud should be familiar with how the law protects them and how they can protect their rights if they fall victim to investment fraud.