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Defining Investment Fraud in the Silicon Valley

Defining Investment Fraud in the Silicon Valley

Two would-be fraudsters decide they will pass a securities examination to work as stockbrokers in their own firm. They do pass and decide that they will sell penny stocks and engage in late-day trading. They make a fortune off of this scheme, that is until it is uncovered by the Securities Exchange Commission. What is wrong with selling penny stocks or starting a Ponzi scheme? Are these examples of investment fraud? What exactly is investment fraud anyway?

What is Investment Fraud?

The FBI defines securities fraud as multiple illegal activities including Ponzi schemes, pyramid schemes, embezzlement, foreign currency fraud and late day trading. Investment fraud is any behavior that intends to defraud a victim for financial or pecuniary gain. Often high yield investment fraud schemes sound too good to be true because they are too good to be true. Typically, a high yield investment fraud scheme will promise a large return for a little sum of money placed as an investment. Many of these offers may be unsolicited, meaning you will not know the identity of the caller. Investment fraud results in millions of dollars lost each year in revenue and also undermines the legitimacy of day trading markets.

What About Ponzi Schemes?

A Ponzi scheme is also sometimes referred to as a pyramid scheme but can be relegated to investment fraud, as well. A Ponzi scheme relies on recruitment of newer individuals into the fold who are promised if they make a certain investment into a product or pay a fee that they will receive returns on their investment. This is considered the bottom line. Up the line is where the true profit is made off of referrals and recruitment of lower ranking members who never see a return on their investment. While this does not happen on the stock market, often a businessperson might be tricked into making an investment into what appeared to be a solid product only to find out that the product does not exist at all or that there is no market to sell the product.

How Can You Prevent Investment Fraud as a Consumer or Small Business

You can take steps to prevent falling victim to investment fraud. First, if you are considering making a one-time investment with a small company, say to put collateral or start-up money down, get a strong idea of the company’s financials, what their financial forecasting and trajectory looks like and what the company’s target audience is. If you are still on the fence, you are not obligated to invest. As a consumer, avoid penny stocks and get rich quick schemes. Do your own research about securities you consider worth investing in. Contact a licensed broker from a legitimate company such as TD Ameritrade or Fidelity.

Contact the Silicon Valley Investment Fraud Lawyers at SAC Attorneys

If your or someone you know has fallen victim to investment fraud, you may have questions about your next steps. You do have recourse. You should not feel ashamed as this can happen to anybody, and especially to small business owners just starting out . Our lawyers at SAC Attorneys specialize in investment fraud. We are experts in this area of the law and want to remind our readers of the fiduciary duty that brokers owe their clients. If you believe you have a case, contact us today to schedule a consultation.

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Mr. Cai Is a Diligent Attorney. My sister and I were defendants in a civil litigation case. We hired James Cai and his law firm, SAC Attorneys LLP. Mr. Cai is a diligent attorney and responded to our questions in a timely fashion. He and his staff were very helpful in keeping us informed of the proceedings of the case and in explaining each step. Mr. Cai is also very conscientious of fees and costs, and avoided unnecessary charges. The results of the Summary Adjudication sided with us. The Court Trial resulted in the “Final Statement of Decision” and “Judgment after Court Trial” overwhelmingly siding with us. Cynthia F.
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