Investment fraud, also referred to as securities fraud or stock market fraud, consists of a number of different activities and tactics that involve deceit by financial advisors, traders or other market participants, to the detriment of unwitting and susceptible investors.
Some comment types of investment fraud include:
- Ponzi schemes
- Market manipulation
- Insider trading
- Other investment scams
Investment Fraud Case Study
Mr. Gold and his wife Mrs. Gold were both 57 years old, and for the past 20 years had chosen to invest in a Locked-in Retirement Account (henceforth referred to as LIRA) to prepare for their golden years. The Golds were anxious to buy property in Florida upon their retirement, but realized that they would require a portion of the money that was locked into their LIRA in order to complete the transaction.
Mr. and Mrs. Gold responded to a promotional ad for NewCo which offered an investment opportunity that seemed to meet their needs. That is, funds that they could immediately access in order to purchase their retirement home in Florida while still being able to maintain their valuable investment.
The Golds decided to meet with representatives from NewCo at their offices, 101 You scam St., so that they could learn more about their products. Upon their arrival and the cursory exchange of pleasantries, they expressed an interest in the ‘RRSP loan’ that was being offered. The Golds were assured that the special RRSP offered by NewCo would allow them to work within the parameters of the existing tax laws and have the ability to access their locked-in funds. They were informed that they would receive the loan if they sold the investments they currently held in their LIRA, and then to purchase NewCo shares. Once the Golds bought the shares, NewCo promised to loan the Gold’s back 70% of their initial investment (tax-free), which would permit them to still hold onto their valuable LIRA investment.
Mr. and Mrs. Gold followed the directions given to them from the NewCo representatives and sold their current investments, and proceeding to buy shares in NewCo within their LIRA. The Golds were satisfied that in one week, they would receive the cash loan for 70% of the value within their LIRA. Three weeks passed, though, without receiving the promised cash loan of 70%. Mr. and Mrs. Gold become increasingly frustrated, and returned to the offices of NewCo to confront the employees that they had met with, and to obtain the loan they so desperately needed.
Much to their dismay, the offices at 101 You scam St. were vacant, with scattered office supplies throughout the suite. They immediately logged in to their LIRA account online so that they could sell their shares in NewCo. Shockingly, the value of their shares had significantly dropped. When purchased, each share was worth $2.75. To their horror and in utter disbelief, the shares could now be sold for $0.05. The Golds, of course, lost all of their LIRA life savings.
Relevant Evidence:
- Investment account statements
- Contracts and agreements
- Investment prospectus