Investment Fraud Attorney

An investment fraud attorney knows that the financial industry creates opportunities for a few unethical brokers and others to separate hard working people from their savings through scams involving fraudulent investments. Brokers who sell investment products are required to be licensed, so your first line of protection is to make sure that you are only dealing with a licensed broker. Still, it’s important that investors be aware of the types of investment scams that are prevalent, because although it is a small minority, even licensed brokers can get involved in investment fraud.

If you have been persuaded to invest money in a venture or a product that promises unusually high returns and then tanks, you may have fallen victim to investment fraud, in which case you should hire an experienced securities lawyer Florida, who may be able to help you recover all or part of your money. Here we discuss a small sampling of a few of the most common investment frauds that have succeeded in cheating members of the public in recent years.

Penny Stock Scams

You may have received an email or landed on a website describing a rags-to-riches story of someone who invested his last couple of hundred dollars in a particular penny stock and ended up a millionaire. Penny stocks, also known as micro-cap stocks, allow someone with very little money to invest to buy a large number of shares that they are told are likely to double, triple, or quadruple in value in a short time. Because they are so cheap to begin with, an increase in value of only a couple of cents can, in theory, increase your wealth dramatically.

Very experienced investors can and do sometimes make big bucks investing in penny stocks. But for the rest of us, especially those who have limited or moderate investing experience and who cannot afford to lose their entire investment, if a highly speculative stock tanks—as penny stocks often do—they can lose everything. For most investors, penny stocks are a bad bet. Because of their low value, they tend to fly under the regulatory radar because they fall below the SEC’s reporting requirements. Without the usual information and disclosure requirements and with virtually no regulatory oversight, professional analysis, or scrutiny by the press, these cheap investments provide a ripe opportunity for fraud.

Some penny stock offerings are essentially bogus, based on some breakthrough technology that sounds amazing but can’t be verified, or the anticipation of a yet unannounced contract, that likewise can’t be verified. The offering may have nothing behind it but an idea—no operations, sales, earnings, or audited financial statements.

Furthermore, because there is such a low trading volume in penny stocks, they lack liquidity. If you need to convert your assets to cash, it will typically be difficult or impossible, without causing a dramatic drop in market price. Unethical types can use this to their advantage by perpetrating “pump and dump” schemes. An unscrupulous person will purchase a large block of a company’s stock at a very low price, then hype it up by spreading false or misleading promotional information, often via the internet. This causes a short-term jump in the stock’s price as demand temporarily increases. Once this happens, the scammer dumps his shares, causing the price to crash. He walks away with his profits, leaving the other stockholders with a worthless investment.

If your broker or someone who has contacted you via unsolicited email has sold you penny stocks that rapidly tanked, you should speak to a securities lawyer.

Offshore Investment Frauds

The United States has regulations and oversight in place that, while certainly not foolproof, provide a certain level of protection for investors and serious consequences for those who commit fraud. Other countries often lack this oversight and may provide fertile grounds for scam artists. If you think opportunities abroad are appealing, avoid investing in one particular overseas company. You could be buying a pig in a poke. There are professionally managed world index funds that can give you access to diversified international investments that are carefully vetted by fund managers. Stick with those funds with a history, favorable track record, and diversified portfolio.


Viatical settlements are a type of investment product that were designed to help people with illnesses expected to be terminal to obtain money for medical treatment and living expenses by selling the death benefit from their life insurance policies for immediate cash. The investor would become the new beneficiary of the policy.

There were a lot of viaticals sold at the height of the AIDS epidemic. Viaticals are not illegal, but they do offer opportunities to defraud the inexperienced or unwary investor. The policy holder might not actually have a terminal condition, or there may be little or no actual life insurance. Sometimes the same policy benefit has been sold to multiple investors.

Unless you have very specialized knowledge of this complicated type of investment—sufficient to distinguish the valid from the fraudulent—and are willing and able to conduct the due diligence required, the potential for fraud is so great that you should avoid viatical settlements. If you have been defrauded in a viatical scheme, contact a Florida securities attorney to learn what options might be available to you.

Precious Metals

Another common internet hype, precious metals and gem schemes, seem to be rampant now. Coins may be represented as being more valuable than they actually are. Gemstones may contain flaws that affect their value. Coins or bullion that are purchased to be held by the seller in vaults for “safekeeping” (often at an additional “storage fee,”) may not even exist. Mining frauds tout a new break though technology that promises access to riches in previously closed mines.

Precious metals are a commodity and can be a useful hedge in volatile markets. But they must be purchased with extreme care and only after thorough due diligence.

Telemarketing Fraud

A salesperson calls you saying you’ve been selected to be among the few investors to be included in an exciting investment opportunity. It might be stock in a new company, investment in a motion picture (throwing out names of celebrities expected to be featured), oil or gas wells, currency, commodities, mining, precious metals, or an offshore investment known only to a select few. These callers are well-trained in high pressure tactics and carefully scripted to lead you into a sale, often by creating a “yes pattern” in which you are asked if you agree with a series of no-brainer statements, setting you up for the close.

No investment should be made on the phone or under pressure of any kind. The fact that the sales agent is pressing for an immediate close, without giving you the chance to fully investigate the investment being offered, probably means it is bogus. Any time an unknown sales agent offers you an investment over the phone, you should hang up.

Ponzi and Pyramid Schemes

A Ponzi scheme is a type of investment fraud, named after a 1920’s con artist named Charles Ponzi and, in recent years, made famous by convicted scamster Bernie Madoff. In this scam, new investors are constantly being recruited to input money that is paid to earlier investors― and of course the person administering the scheme. There may be little or no underlying investments at all. Although initially investors appear to be making money, they are not earning any actual income on their “investment,” only a distribution of capital being pumped into the scheme by new “investors.” Pleased with the returns their statements show, they may invest ever increasing amounts of their own funds and encourage family and friends to do likewise. The scheme has to eventually collapse as the feed of new investors can only sustain the scheme for so long.

Affinity Group Scams

Affinity fraud is a kind of investment fraud aimed at members of a particular identifiable group, such as the elderly, an ethnic or minority group, a religious group, or even a particular professional group. The perpetrators of this type of fraud often pose as members of the group and enlist the group’s leaders to encourage its members to participate, who unknowingly becoming complicit with the scammers seeking to exploit the close relationships and trust among the group’s members. Victims are often reluctant to reveal the scam to authorities because of their relationships with those involved, so the fraud may escape notice for years.

Institutionalized Fraud

The Enron and WorldCom scandals, among others, involved established corporations, top accounting firms, and major brokerages houses. Illegal accounting practices created the appearance of profits that didn’t really exist and those institutions got away with it as long as the market was on the rise and it seemed that everyone was making money. Accounting fraud, unethical mutual fund practices, and analyst research recommendations to investors influenced by investment banking relationships, contributed to individual investors losing large amounts of money. This included pension funds going broke, eating up the retirement savings of workers who had depended on their pensions to carry them through their later years. Such illegal practices are often hidden in rising markets and exposed in declining ones.

Get Help from a Qualified and Experienced Florida Investment Fraud Attorney

These and many other investment fraud schemes are often very sophisticated and insidious. Many, many people are taken in, including some who are usually conservative and careful investors. If you have become a victim of investment fraud, don’t be embarrassed; you are not alone.

Florida, in part because of its large senior population, is home to numerous fraud victims. If you are among them, contact the law offices of Florida investment funds lawyer, Todd A. Zuckerbrod, P.A. for the help you need. You may be able to not only bring the con artists to justice but also to recover some or all of the money you have lost. Todd Zuckerbrod has more than 30 years of experience in the securities industry, having served as an Enforcement Attorney with the New York Stock Exchange (NYSE), member of the Law Department of Merrill Lynch, as outside counsel with the law firm of Greenberg Traurig and as the general counsel of a brokerage firm, before going into private practice. He understands the devastation that investment fraud can cause to honest and hardworking people who have had the foresight to invest for their future and have lost the security that they expected and deserved. For aggressive and committed legal representation when you’ve lost money due to investment fraud, call the Zuckerbrod law office in Boca Raton, Florida to schedule a no-cost consultation.