If you follow the financial media, you have probably heard the terms “Ponzi scheme” and “investment fraud.” However, the terms are not interchangeable.
The varying definitions might not seem important if you have lost most of your savings. However, if you are an investor, it is good to know the specifics of Ponzi schemes vs. investment fraud and understand the common ways cheaters can steal your money. If you are looking to file a claim to get your money back, the experienced Ponzi scheme attorneys at Silver Law Group can help you with your legal concerns.
A Ponzi scheme is a scam that its promoters run to lure people into investing their money. The operators may set up a company or investment fund that seems legitimate and promises generous returns.
The initial investors may receive substantial returns in the early days of the scheme but the operators depend on new investors to provide the capital to pay existing investors. Eventually, the new money flowing in is insufficient to pay the existing investors and the scheme unravels.
People who were cheated in Ponzi schemes can seek compensation for their losses, but the process requires skilled and experienced legal representation. The operators of the scheme are often insolvent, so obtaining compensation can require bringing claims against lawyers, accountants, financial advisors, banks, and others who promoted the scheme.
There are other common forms of investment fraud besides Ponzi schemes. Many of these involve publicly traded corporations engaging in misconduct to manipulate their stock price. Our securities fraud attorneys can assist plaintiffs in joining class action lawsuits for many of these scenarios.
A common form of investor fraud involves providing false information to impact stock prices. Any statement made by a company official that is untrue or misleading and could influence someone to buy or sell a stock could represent a fraudulent statement. 17 Code of Federal Rules § 240.10b-5 expressly prohibits this conduct.
Investors who suffer harm because they relied on a fraudulent statement when making an investment decision could bring a lawsuit against the company, its executives, and the Board of Directors for violating the prohibition against fraudulent statements.
Sometimes people engage in intentional misconduct to influence the price of a stock. For example, a group of stockholders might spread false information to inflate the price of the stock temporarily, then sell it when the price begins to fall, reaping inflated profits. This is often called a Pump-and-Dump Scheme.
Another strategy is for shareholders to place multiple orders for a stock at various price points to generate the appearance of increased trading activity. They often cancel many of the orders, but the stock will usually rise as other buyers jump in, allowing the manipulators to sell at an inflated price.
Company executives sometimes provide false information to the auditors who must prepare their financial statements. Overstating revenues, understating liabilities, delaying the release of information for various reasons, and other forms of financial statement manipulation are common.
When investors are cheated by Ponzi scheme operators, company executives, or others seeking to manipulate the financial markets, they often have recourse to the courts. The attorneys at Silver Law Group provide aggressive representation to investors to help them recoup the funds they lost due to the actions of fraudsters and liable parties.
Class action lawsuits are an effective tool in many cases. Investors whose losses were not large enough to justify bringing an individual lawsuit can join with other investors to seek accountability from the parties who committed misconduct.
Depending on the circumstances, a class action could also be an effective approach to recouping losses from a Ponzi scheme. Commercial banks, accountants, financial advisors, lawyers, and others who provided services to the Ponzi schemer or promoted the fraudulent investment could be liable.
Financial markets must be fair. When you have lost money because someone engaged in investment fraud, you have legal avenues to seek compensation.
Speak with the knowledgeable attorney at Silver Law Group about your situation. We represent investors all over the country and could evaluate your case to advise you about the best way to proceed.
