Securities Fraud: Disturbing ways people steal billions of dollars
On average, investment fraud in the United States can cost anywhere from $10-$40 billion dollars every year! Securities fraud can also be called investment fraud, or stock fraud, relating to stocks on the stock market. Everyday investors are at the forefront of this incredulous scam, and pay the price by purchasing or selling stocks according to false information. Some types of security frauds consist of actually stealing from investors! And even manipulating their stock by lying to auditors and cheating financial reports! The end result is that people that got scammed have to consult with a lawyer to get their investment back. The most common questions on securities fraud have been answered in this article: TG Daily on Securities Fraud Defense. We recommend you give it a read if you have been victim of securities fraud.
Anywho, in this article, we will talk about several different kinds of securities fraud.
Fraud by corporations
In the early 2000s, high-level corporate fraud had become widely publicized. The biggest corporate fraud to take place at that time was a company called Enron, an American energy commodities service. They were basically selling fake contracts on huge energy bills, then cashing out on money from future contracts that haven’t even expired! Extremely lucrative and outright criminal. In the end, the top executives stole billions of dollars, and all from the pockets of regular people.
During this time, the Bush Administration started an aggressive agenda on such criminal conduct. The FBI was even going as far as to say that corporate fraud cases will increase ten fold after the 2008 financial crisis. let’s hope this aggressive agenda is still in place in 2020, and we can feel safe knowing that financial millionaires aren’t turning into criminal billionaires.
A dummy Corporation? What does that sound like to you? Well, it’s basically a fabricated corporation that tries to be very similar in nature to an existing and well-known corporation. Dummy corps. are fake companies created by fraudsters, who then sell stocks to everyday investors. Little do they know, these investors think they are buying stocks from that other, “real” corporation. Are these companies set up just for tricking people into buying fake shares? Absolutely, and it’s quite despicable that this still goes on in today’s modern world.
Insider trading is simple, the trading of corporate stocks by corporate insiders like directors and officers. Shareholders with more than 10% of the company are also included. Normally, under most circumstances, insider trading can be done safely and legally. The problem comes when non-public information is used to then trade large amounts of shares on the notion of knowing something important before everyone else. This is clearly a form of stock manipulation, and is not accepted as legal activity.
There’s been a great episode on LE recently that goes into this topic, check it out on YOutube:
In my opinion, boiler rooms are the epitome of untrustworthy stock brokers. A boiler room is a brokerage that uses extremely aggressive sales tactics in order to fish in gullible people to buy into fraud schemes. A lot of these illegal boiler rooms are not even licensed, and maybe full of financial advisors who are inexperienced and criminal. The main goal of boiler rooms is to sell large amounts of small cap stocks, or penny stocks. Dumping thousands of dollars on these stocks is extremely risky, but coming from a boiler room call center, it’s the best deal in town!