Articles Tagged with scam

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As contingency fee lawyers, we evaluate a steady stream of potential securities fraud cases.  We meet with investors of all ages and backgrounds who have been cheated, defrauded and tricked into making bogus investments.  We evaluate far more cases than we agree to take.

One of the most difficult types of cases that we evaluate is the so-called alternative investment case.   Alternative investments are not traditional stocks or bonds purchased through a normal brokerage firm.   Instead, these investments are offered directly by a promoter of some business scheme, perhaps an oil well, a gold mine, a real estate development, or some brand new technology.  The promoter offers the chance to get in on the “ground floor” and make enormous profit.

The alternative investment can take the form of a limited partnership interest, an LLC interest, or some other portion of a small, non-publicly traded business entity.  The investor does not get normal account statements, like a regular brokerage firm.  Instead, the investor gets a K-1 at the end of the year for tax purposes and perhaps a regular newsletter on how the gold mine, oil well (or whatever) is doing.  It’s almost always doing great!

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stock marketIf you have lost money in a securities investment, obviously you would be happy to recoup some of those funds.  Many companies that offer assistance with recovering lost capital, however, are likely fraudulent.  A company may sound credible, have authentic looking documents, and a fancy website, but if the deal sounds too good to be true, it probably is a scam.

Tips for Investors

  • Be a Skeptic. Assume that any “recovery” company that reaches out to you is a fake until you can independently verify it is a legitimate company – especially if it claims to be registered with FINRA. Look it up on FINRA’s BrokerCheck site and use the contact information on the BrokerCheck report to reach out to the firm.
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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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mosquito-on-my-hand-1385575The SEC has issued an Investor Alert regarding fraudsters attempting to profit by exploiting the dangers associated with the Zika virus.  For those not following the news, Zika is a tropical disease transmitted by mosquitoes.  Outbreaks have been reported in South America, with cases popping up in the United States.  Zika infections in pregnant mothers have recently been linked to microcephaly in babies, i.e., babies born with heads much smaller than expected, leading to significant public health concerns.

According to the SEC, fraudsters are attempting to sell investments in companies supposedly developing treatments or other products for Zika.  Scams could include so-called “pump-and-dump” schemes, whereby fraudsters encourage investors to buy shares in a company or a fund by spreading rumors that the company is involved in developing a treatment or cure for Zika.  The rumors prompt investors to buy the shares, thus driving up the price.  The fraudsters then sell their shares while the price is high but before the truth is revealed.  Penny stocks are particularly susceptible to this kind of fraud.  As always, be wary before sinking a significant sum of money in penny stocks.

The SEC recommends that investors use common sense before putting money in a Zika-related investment.  Specifically, before making any investment – especially one tied to Zika – an investor should do the following:

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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.