Investment Fraud, a Serious White Collar Crime

Investment Fraud, a Serious White Collar Crime

Being a victim of investment fraud is not only traumatic, it’s expensive. Your trust in others will be shaken, and you may lose all the money you have.

Many investment frauds are referred to as “Ponzi schemes”. A Ponzi scheme is a fraud whereby purported returns on the investment are paid by funds coming in from new investors. The organizer of the scheme gets investors by promising to place their money in high yield investments which are free of risk. The monies plowed into the scheme are used to pay the early investors a ridiculously high rate of return; this rate of return is then used to generate further investors. The Ponzi scheme has no legitimate earnings; the money that is paid out is only from the constant flow of money from new investors. They collapse when either new money dries up or many investors want to cash out at the same time.

Investment Fraud Law in Houston is a special area of the law, and as a result of the much-publicized Bernie Madoff scheme that bilked millions of dollars from thousands of investors, the awaking of the public to these schemes has allowed this area of law to flourish. Along with a greater awareness, the laws designed to protect the public from such schemes in the future are being reviewed and amended by the SEC, Securities and Exchange Commission.

There are certain tell-tale signs that an investment you are being offered may prove to be fraudulent, and if these signs do appear, you will want to talk immediately to an attorney skilled in Investment Fraud Law in Houston. Amongst the signs are:

* A promise of high returns with no risk: All investments carry some degree of risk, and usually the promises of higher yields indicate a higher risk. A promise of guaranteed rewards should generate suspicion.

* Consistent returns: Madoff did not promise ludicrously high returns, but he did show consistent returns day in and day out regardless of the market circumstances. The returns on legitimate investments fluctuate.

* Unregistered investment: A Ponzi scheme involves unregistered investments, neither with the SEC nor with state regulators. A registered investment is important, because without registration the investor has no access to any company data, including management, products or finances.

* Sellers are not licensed: Law, both Federal and State, demands that investment brokers and the firms they represent be licensed. A sign of a potential scam is the selling of the investment by an unregistered individual or firm.

* Secretive: Avoid any investment where you cannot get direct answers to all your questions.

* Difficulty with payments: If a payment is missed or the check is dishonored, you may be in trouble. Many promoters of Ponzi schemes encourage you to keep rolling over your investment so that issues with payment do not arise until they have fled with the money.

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