Securities Fraud—A Basic Overview
The nation’s economy is increasingly dependent on the success and integrity of the securities and commodities markets. As a result, the FBI diligently investigates criminal activity in the markets and against investors whenever it arises.
The term Securities Fraud covers a wide range of illegal activities, all of which involve the deception of investors or the manipulation of financial markets.
- High Yield Investment Fraud
- Ponzi Schemes
- Pyramid Schemes
- Advanced Fee Schemes
- Foreign Currency Fraud
- Broker Embezzlement
- Hedge Fund Related Fraud
- Late Day Trading
Common Scams—Be on the Lookout for Fraud
High Yield Investment Frauds
- Characterized by promises of high rates of return with little or no risk.
- May involve various forms of investments (e.g. securities, commodities, real estate, precious metals, etc.)
- “Too good to be true” investment opportunities.
- Perpetrators may contact victims by telephone, e-mail, or in person.
- The offers are generally unsolicited.
Ponzi & Pyramid Schemes
- Use money collected from new victims to pay the high rates of return promised to earlier investors.
- Payouts give the impression of a legitimate, money-making enterprise behind the fraudster’s story.
- In reality, investors are the only source of funding.
Advance Fee Schemes
- Victims advance relatively small sums of money in the hope of realizing much larger gains.
- Gains never materialize because there is no legitimate underlying investment.
- To participate a particular investment opportunity, victims must first send funds to cover “taxes” or “processing fees.”
- After victims send the “fees,” the perpetrators appropriate the funds and never deliver on the investment.