Investment Fraud

Investment Fraud
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Investment fraud occurs when there is a deception about an investment which influences a company or an individual to make decisions and actions which lead to losses. Illegal insider trading can happen when directors and management share confidential information with outsiders to influence them to buy or sell stocks in order to make profits and this information was not available to other investors or the public. These insiders can also trade illegally using this information and buying stock of the company illegitimately.

Fraudsters can manipulate the stock market by spreading false information about a company in forums, chat rooms and message boards so investors buy or sell shares which they would not have bought or sold if they had the right information.

They may spread false rumors about an investment which make the share price of that investment to rise steeply. They then sell the shares at a huge profit and withdraw from the stock market. The share price then falls back to the actual price leaving the investors who bought the shares with unrealistic high-priced shares which they cannot sell. These investors may even sell the shares at a loss or retain them with low value. The fraudsters can also short-sell shares by buying low.

Investment fraud occurs when brokerage firms embezzle money from investors or they misreport shares bought and sold in order to increase the activity of a share which will make investors buy. 

Investment fraud may involve companies which produce false reports at the end of the year to attract investors to buy shares of stocks of the company. They may include information about losses, risks, debts disclosures and profit projections which are not correct or they may omit some information misleading the investors in their investment decisions. They escape the regulatory scrutiny because they do not adhere to the laws and regulations.

They paint a bright picture of the investment opportunities portraying a profit projection and proceeds that are false and unrealistic. They may provide potential investors with risk disclosures that are carefully worded and printed using legal jargon which imitate the real investments in order to manipulate buyers. Investors should be careful and check whether the investment is registered with Securities and Exchange Commission SEC before throwing away their money unknowingly. Investment fraud also includes pyramid schemes and online investment fraud using internet scams which are hard to track. 

Tracking fraudsters can be difficult because they use persuasive language and all the documents and brochures look similar to the genuine ones. They use aggressive telemarketing, emails, advertisements and promotions on national cable stations, financial and legal jargons promising high-profits and low?risk investments with immediate returns which mislead the potential investors. These spammers operate from one country to another crossing borders and operating offshore. They target the elderly who may not be able to detect the investment fraud. Regulations are stricter and the public are being educated on how to detect and report investment fraud. Law enforcers are alert and aggressive.

Last modified onTuesday, 02 April 2013 23:38
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