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Types of Securities Fraud


Securities fraud is a serious crime in the United States of America. This crime can result in serious consequences for the individuals and institutions involved. Securities fraud is defined as the deception of investors or manipulation of financial markets for personal gain. This crime involves misrepresenting information investors use to make decisions. Securities fraud includes withholding crucial information, providing false information, giving bad advice, and offering or acting on inside information. There are various types of securities fraud. In this article, we discuss some of the types of securities fraud.

Ponzi Schemes

With Ponzi schemes, investors are promised high returns with little or no risk involved. The operator takes money from investors, assuring them they will gain substantial profits within a short time. Then, they use the money from new investors to pay the high rates of return promised to earlier investors. These actions create an illusion of legitimacy and success, enticing more people to join and invest.

As the scheme grows, the pool of new investors decreases, making payouts impossible to sustain. Ponzi schemes usually collapse because of their unsustainable nature, leaving many people with significant losses.

Insider Trading

Insider trading occurs when a person buys or sells securities based on material, non-public information about a company. This type of securities fraud is usually committed by executives, employees, or people with close ties to the company. Insider trading results in perpetrators gaining an unfair advantage over other investors.

However, insider trading is legal in some cases if it meets the provisions of the Securities and Exchange Commission (SEC).

High Yield Investment Fraud

High-yield investment fraud is a type of investment scam characterized by promises of high rates of return with little or no risk. This type of scheme attracts investors by offering significantly higher returns compared to legitimate investment opportunities. Assets that may be involved in this form of securities fraud include securities, real estate, precious metals, and commodities.

Advanced Fee Schemes

The Federal Bureau of Investigations (FBI) defines this type of securities fraud as one involving the advancement of small sums of money to realize much larger gains. However, since there is no legitimate underlying investment, gains never materialize. With advanced fee schemes, victims are usually asked to first send funds to cover “processing fees” of “taxes.” After the perpetrators receive the funds, they do not deliver on the investment.

Omissions or Misrepresentation

This happens when an individual or institution provides false or misleading information regarding an investment or fails to share material information that could affect an investor’s decision.

Beating Accusations of Securities Fraud

An accusation of securities fraud is a serious matter and, as such, should be taken very seriously. A securities fraud charge carries potentially severe penalties, including jail time and huge fines. Retaining an experienced criminal defense attorney when facing securities fraud charges is vital. A qualified attorney can conduct thorough investigations into the allegations against you, gather evidence, and identify weaknesses in the prosecution’s case. An experienced attorney can work with other experts to build a strong defense strategy that can help you fight your charges.

Contact an NYC Securities Fraud Attorney

If you are facing securities fraud charges, contact our experienced NYC securities fraud attorney, Mark I. Cohen, to maximize your chances of preserving your freedom, assets, and reputation.

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