Articles Tagged with Fraud

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AdobeStock_78797750-300x199It’s your money.  You worked hard to earn it. It’s taken years to save it. Now you need to protect it. Here are some tips to help you make more informed investment choices and protect yourself from investment scams.

  1. Check out the “salesperson.” Just because someone says they have a securities license doesn’t mean it’s true. We recently had a potential client call with a complaint about his “stockbroker” who we quickly discovered hasn’t been licensed since the 1990’s. Checking out purported stockbrokers is easy and free at FINRA’s BrokerCheck site. In addition to information about the securities licenses the individual has, it will show you his or her employment history, if he or she has ever filed for bankruptcy, and any customer complaints or charges by securities regulators.
  1. Don’t believe promises of little or no risk with high returns. The higher the returns, the riskier the investment. Period. 
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How to handle the finances after the death of a loved one.

In September 2016, the Florida Office of Financial Regulation issued a Consumer Alert titled “Managing Finances After the Death of a Loved One.”   The alert makes a number of helpful recommendations to take following the death of a family member or loved one including:

  • Gathering important documents such as wills, Social Security cards, insurance plans and brokerage account statements.
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Prime Bank Instrument Fraud 

If you have been approached to invest in “prime bank” instruments, don’t do it!  It is a scam. Prime bank scams purportedly involve the trading of prime bank instruments issued or guaranteed by financial institutions such as the World Bank, the International Monetary Fund, or the U.S. Federal Reserve Bank.  Promoters of these supposed prime bank investments claim investors are guaranteed to receive high-yield returns in a matter of days or weeks, with little or no risk.  According to the U.S. Securities and Exchange Commission, these investments do not exist.

Fraudsters may use complex and official-sounding terms such as, debenture, bank guarantee, private funding project, offshore trading program, trading facility, or guaranteed bank note, in an effort to make the scheme seem legitimate.  Oftentimes, promoters will claim that the instruments are available by invitation only to select clients. They may claim these are the “secret” way wealthy people make money and will cite a requirement for secrecy if a potential investor asks for references.  Some goes so far as to have investors sign official-looking non-disclosure agreements.

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Illegal sales practices: Wells Fargo To Settle

Wells Fargo & Co. has agreed to pay $185 million to settle federal regulators’ investigation for illegal sales practices.  The bank acknowledged that it pushed employees to open as many as 2 million accounts without customers’ approval.  As a result of the scandal, Wells Fargo said, effective January 1, 2017, it would eliminate any sales goals for credit cards, checking accounts and other retail banking products.

The bank’s CEO, John Stumpf, who is set to testify before the Senate Banking Committee on September 19, said he takes responsibility for the improper sales tactics. He indicated that the bank now has improved its training programs and supervision.  The bank also indicated that the employees involved in the improper sales practices were low-level employees and the practices were not intended to increase bank profits.

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Over $100 Million in Rewards Given to Whistleblowers

The SEC has announced that, as of yesterday, it has made more than $100 million in awards to whistleblowers under the SEC Whistleblower program.  Created by Congress as part of the Dodd-Frank Act in 2010, the program has been up and running since August 2011.  After five years, the program appears to be a resounding success.

Under the whistleblower program, one who voluntarily provides a useful tip to the SEC that leads to the recovery of over $1 million in sanctions may get an award.  The information regarding a securities law violation must be independently known by the whistleblower and cannot be derived from another source.  The amount of the award is discretionary, but under SEC rules, the amount will be between 10% and 30% of the SEC’s recovery.  The amount may be adjusted based on the significance of the information provided, the degree of assistance provided by the whistleblower, the SEC’s interest in deterring future violations, and the whistleblower’s cooperation with a company’s internal compliance and auditing systems.  The Dodd-Frank Act also included anti-retaliation protections, creating both a private right of action for whistleblowers and enforcement mechanisms for the SEC.

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Last spring, FINRA launched a Securities Helpline for Seniors – known as HELPS – as a resource for senior investors with questions and concerns.  With the country’s growing population of senior citizens, who are often targeted in fraudulent and deceptive investment schemes, the HELPS line is just another resource in FINRA’s recent push to protect our aging population.

The HELPS line launched on April 20, 2015, and through December 2015, more than 2,500 calls had been placed through the hotline.  The average age of the caller was 70 (though the actual age range was 22 to 100), and the calls lasted an average of 25 minutes each.  In 2015, HELPS staff assisted callers in recovering $750,000 in voluntary reimbursements from securities firms.

FINRA is also using data collected during calls to assist it with its regulatory goals.  By tracking trends in the calls placed to the hotline, FINRA can more readily issue Investor Alerts on topics of current interest.  For instance, after a spate of calls about transfer on death accounts, FINRA issued an Investor Alert about that specific topic.

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West Palm Beach False Claims Act | IRS Phone Fraud

FINRA recently released an Investor Alert, entitled Tools of the Fraud Trade: Phones and Emotions, warning seniors and other investors about a new IRS impersonation scam.

The basic scam involves a very aggressive and authoritative caller who tells the victim that he or she owes back taxes and proceeds to demand immediate payment of taxes by credit card or other electronic payment.  These demands may be accompanied by threats of prosecution if the victim doesn’t pay.  The fraudster may use a fake badge number, may use personal information about the victim found on the internet, and may have a fake caller ID number intended to link the call to the IRS in some way.  These lies are intended to build up the fraudster’s credibility, in order to get the victim to let his or her guard down.

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The Department of Justice announced that high-ranking officials of the governing body for soccer worldwide – referred to as “football” outside of the United States – the Fédération Internationale de Football Association (“FIFA”), and others have been charged with racketeering, wire fraud, money laundering, and bribery.  According to the Justice Department, the soccer officials allegedly conspired to solicit and receive in excess of $150 million in bribes and kickbacks from sports marketing executives and others in return for their official support.  The alleged kickbacks relate to the commercialization of the media and marketing rights for various soccer events including, FIFA World Cup qualifying matches, the CONCACAF Gold Cup, and the CONCACAF Champions League, as well as the sponsorship of the Brazilian national soccer federation by a major U.S. sportswear company.

FIFA is comprised of more than 200 member associations globally, each representing a particular nation or territory, including the United States and four U.S. territories overseas.  Six continental confederations assist FIFA in governing soccer in different regions of the world.  The U.S. Soccer Federation is a member of a group of 41 associations known as CONCACAF which stands for the Confederation of North, Central America and Caribbean Association Football and is headquartered in Miami, Florida.  Other CONCACAF member nations include Canada, Mexico, Jamaica, Cuba and the Bahamas.

The Justice Department alleges that 14 defendants, including two current FIFA vice-presidents and the current and former presidents of CONCACAF, have participated in a 24-year scheme of corruption and bribery.  Swiss authorities arrested seven of the defendants in Zurich at the request of the United States, Jeffrey Webb, Eduardo Li, Julio Rocha, Costas Takkas, Eugenio Figueredo, Rafael Esquivel, and Jose Maria Marin.  In addition, the Department of Justice announced that four individuals and two companies have already pleaded guilty they include Charles Blazer, the former general secretary of CONCACAF, and Jose Hawilla, the owner and founder of Traffic Group, a multinational sports marketing group based in Brazil.

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George Theodule, formerly of Wellington, Florida, was sentenced for orchestrating a Ponzi-like affinity fraud scheme on fellow Haitians residing in the United States.  In October 2013, Theodule agreed to plead guilty to one count of wire fraud in exchange for the government dropping the other 39 charges against him. 

According to the indictment, Theodule solicited individuals in the Haitian community, primarily in South Florida, to invest with his companies, Creative Capital Consortium and A Creative Capital Concepts.  Theodule allegedly told investors that he could double their money in 90 days by trading in stock options.  Theodule allegedly preyed on members of the Haitian community in a classic affinity fraud.

An affinity fraud is an investment scam that targets members of identifiable groups, such as religious or ethnic communities. Oftentimes, the fraudsters are members of the group. They typically enlist respected members of the group to spread the word about the scheme by convincing those people that a fraudulent investment is legitimate and worthwhile.