When deceptive practices lead to serious investor losses, those investors have a right to pursue a financial remedy from the accountable parties. Ponzi schemes are just one of many forms of investment fraud that can be perpetrated on unsuspecting investors.
Often, the fraudster could have been detected and caught early on if not for brokers and investment advisors’ participation or negligence. If you have lost money in a suspected Ponzi scheme, you may have grounds to hold any broker or investment advisor involved legally responsible. A Ponzi scheme compensation attorney can help determine whether you can pursue a remedy through an individual lawsuit or as a member of a class action after a financial firm’s or professional’s breach of trust, negligence, or other misdeed.
Common hallmarks of Ponzi schemes include investments involving unlicensed sellers or unregistered securities, unusually complex business models with vague terminology, and unreasonable claims about guaranteed investment returns with limited risk. Many schemes are only able to expand because the fraudster is linked to a legitimate brokerage firm or other institution.
These institutions, as well as brokers or investment advisors involved in the scam, may be liable in the aftermath of a Ponzi scheme when investors are seeking compensation. Actions by a brokerage firm, its brokers, and/or investment advisors that can enable a Ponzi scheme include:
In some cases, broker and investment advisor liability in Ponzi schemes may stem from intentional misconduct rather than negligent breaches of a fiduciary duty. For example, a broker or financial advisor who knowingly engages in a fraud for the purpose of making money for themselves has clearly violated their duty of care and could be liable in a claim for compensation.
While masterminds of Ponzi schemes may face civil or even criminal liability once the fraud is unmasked, the money that investors unknowingly contributed to the scheme is usually lost and gone.
However, theft or misappropriation by a broker or investment advisor related to a Ponzi scheme can lead to clear determination of liability for investment losses. A broker or financial advisor’s misrepresentations of the scheme as a legitimate investment (for personal gain, due to negligent actions, or any breach that fails to protect a client’s best interests) can result in liability for damages.
A defrauded investor may also have claims against other third parties who worked alongside the brokerage firm, broker, and/or investment advisor. These parties who may have aided and abetted a Ponzi scheme could include banks, attorneys, and even accountants.
For investors who fall prey to Ponzi schemes, it is wise to take decisive legal action for the best chance of financial recovery. Depending on the circumstances, it may be possible to recover investment losses through litigation in federal court or a class action lawsuit against the broker, investment advisor, and anyone that played a role in the Ponzi scheme.
Whether due to purposeful or negligent behavior in handling your investments, broker and investment advisor liability in Ponzi schemes can allow the fraud to continue for years before it is finally uncovered. At that point, investor losses can be in the millions of dollars.
Because brokerage firms are responsible for supervising the conduct of employees, these entities may be liable for losses caused by a broker or investment advisor. If you believe they violated their fiduciary duty – either intentionally or unintentionally – and you lost money in a suspected Ponzi scheme, the Silver Law Group can help.
Scott Silver and his securities litigation attorneys have handled a wide variety of Ponzi scheme cases nationwide at both the state and federal level. Do not hesitate to contact our office today for a complimentary consultation to learn more about your options.
