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4 common types of investment fraud

Investment fraud typically involves financial investments. For example, an individual selling an investment, such as a stockbroker or someone else, might misrepresent information regarding an investment that results in the investor losing money.

The topic of investment fraud is broad and new types and categories of investment fraud are always being created. If you've been charged with such allegations, it's important that you take your defense seriously as a conviction may come with serious criminal consequences.

Common kinds of investment fraud

Let's review the four most common kinds of investment fraud charges that a white collar worker could find him- or herself facing in court:

  • Ponzi schemes: A Ponzi scheme appears legitimate to investors. Some investors may even generate a profit from their investments into a Ponzi scheme, however, these profits will not last long. Ponzi schemes take money in from new investors and use that money to pay old investors their alleged profits. The problem is, as soon as the source of new investors dries up, payments to old investors stop and the Ponzi scheme crumbles. These investment operations are often based on fraudulent promises to those who join.
  • Pyramid schemes: Pyramid schemes are not very different from Ponzi schemes. However, with these schemes, the investors into the programs become agents who recruit more investors and they receive commissions based on how many new investors they recruit. In some cases, multi-level marketing programs are merely pyramid schemes in disguise.
  • Trading program fraud: This relates to false claims that someone can sell access to special trading programs that virtually guarantee profits. Perpetrators of this fraud may make false promises and false guarantees to investors. They may also use legal documents and sophisticated vocabulary to convince investors that their deal is legitimate.
  • Advance fee fraud: In these schemes, victims might receive a notice that they can get access to a lottery or sweepstakes prize if they pay an advance fee. Next, the victims will receive another notice of unanticipated costs that require them to pay more advanced fees. In the end, victims never receive their payouts and they lose the fees they paid.

Were you accused of investment fraud?

If you are facing investment fraud charges like those above -- or another variety -- it's important to consider the evidence being brought against you and the potential punishments you might face in the event of conviction. Armed with this knowledge, you can begin to formulate your criminal defense with the goal of reducing the chances of conviction or the severity of punishment in your case.

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