Securities Fraud

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.

Definition

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

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.