Investor Fraud

Securities fraud is an all too common crime across the United States these days that continues to grow in popularity. Penalties for brokerage fraud are hefty, including lengthy prison terms and large fines. Many people convicted of securities fraud will have to pay back a percentage of the money they earned from the fraud. Securities fraud can be committed by individuals, corporations, and financial advisors. Private investors are just as likely to commit securities fraud as large corporations are, making it a common crime for the Securities and Exchange Commission to investigate and prosecute. To become a private investor one must have enough net income to cover the investment and cover any debts that may arise from the investment.

Insider Information

Investors have to follow the same securities laws that govern corporations and financial advisors or they face prison terms and fines imposed by the federal government. Insider trading is an illegal practice using non-public information of a corporation to sell and purchase stocks, bonds, or other financial entities. The Securities and Exchange Commission was founded in 1934 to protect investors and consumers from stock fraud but to also investigate private investors believed to be committing securities fraud.

The Private Securities Litigation Reform Act requires the following elements be present in a private investor fraud case:

  • The defendant in the case made a material misrepresentation or omission
  • The defendant in the case acted with a wrongful state of mind
  • The material misrepresentation or omission was made in connection with the purchase or sale of a security
  • The plaintiff victimized by the fraud relied on the misrepresentation or omission
  • The plaintiff suffered an economic loss as a result of the alleged fraud
  • The plaintiff is able to allege and prove loss causation

Investor Fraud Cases

Investor fraud cases occur almost on a daily basis across the country but not everyone reaches the news. One of the most notorious private investor fraud cases to reach the news recently involved Bernie Madoff. Madoff was convicted of committing a Ponzi scheme, called the largest investor fraud ever committed by a single person. It is estimated that $65 billion of money was defrauded from his clients.

Legal Help

If you or a loved one has been the victim of private investor fraud, contact a securities law attorney for legal counsel regarding your case. A broker fraud lawyer will be able to perform an in depth investigation regarding the fraud, file a lawsuit on your behalf, and find others victimized by the private investor and possibly file a class action lawsuit.