Securities Fraud

Securities fraud also known as investment fraud or stock fraud, stems from a variety of deceptive practice in the stock or commodities markets. A person or entity commits securities fraud when that person intentionally provides false information or the omits material information that induces an investor to make purchase or sales decisions. Securities fraud violates both state and federal securities laws.

Securities fraud is a broad category that includes theft or embezzlement from investors, manipulation of stock, misstatements of a public company’s financial reporting, providing misleading or inaccurate information about the underlying securities in mutual funds and bond funds, and misstatements to corporate auditors. Securities fraud can also encompass a wide range of other illegal activity, including violations of the federal securities act of 1933, violations of section 10(b) of the securities act of 1934, state blue sky laws, insider trading, front running of trades, and other illicit activity on trading floors of stock and commodities exchanges.

Securities fraud can also be a crime in which a set of criminal laws set to protect investors and the securities industry. Securities fraud attorneys help protect investors from securities fraud violators both in civil litigation and securities arbitration.

The most common types of securities fraud are insider trading, boiler room fraud, Ponzi schemes, pump and dump schemes and corporate misconduct.

Insider trading is another type of securities fraud. There are two basic types of securities fraud in the insider trading context. First, is where a corporate insider trades a stock on information that is not publicly available. The second type of securities fraud in the context of insider trading is where an owner of ten percent of a company trades shares without adequate reporting.

The most common type of securities fraud in FINRA arbitration is a type of boiler room fraud. Boiler rooms are broker-dealers that apply high pressure sales tactics to coax clients into investing a particular type of investment – usually micro-cap stocks or alternative investments that is generally sold for the benefit of commissions or sold fraudulently.

Another type of securities fraud common in FINRA arbitration is Ponzi schemes. A Ponzi scheme is an investment where subsequent investors fund returns to earlier investors in an effort to mask the fraud. The largest Ponzi scheme ever was operated by Bernie Madoff and uncovered in 2008.

A pump and dump scheme is yet another common type of securities fraud that investors should be careful about. A pump and dump scheme usually involves selling large quantities of micro-cap stock to inflate the price so that the fraudster can ultimately sell his or her shares at the inflated price leaving the victim holding worthless shares in the stock.

Securities fraud can also be a type of corporate misconduct. Securities fraud in the form of corporate misconduct has received significant attention in the last twenty years since the Enron scandal of the early 2000s. One type of corporate misconduct is accounting fraud or accountant fraud. Many accountants over the last two decades have been the subject of civil litigations for falsifying financial reports and corporate documents to make a company look profitable when in fact the client was failing.

Securities fraud is pervasive in the United States. According to federal regulators, investors are defrauded out of $10 billion - $40 billion every single year.

The securities attorneys at Gana Weinstein LLP have a wide-ranging securities fraud practice. We have represented hundreds of investors in securities related litigation. On behalf of our clients we successfully brought claims against some of the largest broker-dealers and registered investment advisers in the country and have brought claims throughout the United States. Our attorneys have brought cases related to securities fraud, boiler rooms, pump and dump schemes, and insider trading. Our attorneys are specifically trained to analyze investments to determine whether our clients have been victims of securities fraud, corporate greed and misconduct.