Types of investment and securities scams include Ponzi schemes, churning, pump and dump schemes, and more. These are among the most common ways investors suffer significant financial losses.
If you suffered investment losses of more than $100,000 due to the misconduct of a financial advisor or broker, our firm is here to help you recover those losses. Let’s take a closer look at common types of investment & securities scams and how a securities lawyer may be able to help you.
Ponzi Schemes Are a Type of Investment and Securities Scam
A Ponzi scheme is a type of investment misconduct where returns are paid to earlier investors with money collected from newer investors rather than from actual profits. These schemes create the illusion of a successful investment and promise unusually strong returns with little to no risk.
As long as new money keeps flowing in, the scheme appears legitimate. But when the stream of new investors slows down, or existing investors try to cash out on their investment, the entire operation collapses, leaving investors with devastating losses.
If your financial advisor or broker placed you into an investment that turned out to be a Ponzi scheme, you may have a claim against the individual and, in some cases, the firm that employed or supervised them. Speak to an attorney to learn more about the different types of investment and securities scams and find out if you have grounds for a claim.
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Churning Is Another Kind of Scam
Churning occurs when a broker who controls or effectively controls an account engages in excessive buying and selling of securities primarily to generate commissions and fees rather than to benefit the investor.
Churning can be difficult to spot because brokers mask it by holding onto underperforming investments and selling profitable ones, making it look like your portfolio is doing well when unnecessary transaction costs are actually draining it.
Warning signs of this type of investment scam include unexpectedly high fees, excessive trading activity in the account, or discuss with your advisor, and overall poor performance despite the appearance of an actively managed account.
Understanding Pump and Dump Schemes
A pump-and-dump scheme occurs when the price of a stock is artificially inflated through false or misleading statements. The people behind the scheme buy shares at a low price, then aggressively promote the stock to drive up demand and inflate its value.
Once the price reaches a peak, they sell off their shares at the inflated price, leaving other investors holding stock that quickly decreases in value. These schemes often target lesser-known stocks and can spread through social media and other types of online campaigns.
If you believe you’ve suffered losses due to a pump and dump scheme or another type of investment and securities scam, don’t hesitate to contact a lawyer and find out if you’re eligible to seek compensation.
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Oil and Gas Investment Scams
Oil and gas investment scams typically involve high-risk energy ventures that are deliberately misrepresented as safe and lucrative opportunities. These schemes are often structured as limited partnerships, with the company based in one state, operations in another, and investors scattered across the country.
This makes it difficult for anyone to verify what’s actually happening on the ground. Promoters may promise guaranteed returns, tax advantages, or exclusive access to a profitable drilling operation. However, in reality, the investment may be worthless or designed to collect fees and commissions from unsuspecting investors.
If a financial advisor or broker recommended an oil and gas investment that turned out to be fraudulent, you may be able to recover your losses. An attorney can provide more information on common types of investment and securities scams and determine if you’re entitled to compensation.
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What To Ask a Lawyer if You Believe You’re a Victim of an Investment or Securities Scam
If you believe you’ve been the victim of one of the common types of investment and securities scams, speaking with an experienced securities lawyer is one of the most important steps you can take.
A lawyer can help you understand whether your losses were the result of misconduct, evaluate whether you have a valid claim, and walk you through the process of pursuing recovery.
Before your consultation, it helps to come prepared with the right questions. Below are some common questions investors ask when they suspect something has gone wrong with their investments:
- Am I paying excessive fees in my employer-sponsored retirement plan?
- How does margin trading work?
- What is securities-based lending?
- How can I find out whether an investment seminar is legitimate or a scam?
- How can I avoid getting involved in a gold investment scam?
- Should I purchase variable annuities with money inside my IRA?
- How can I avoid investment scams through social media sites like Facebook?
- I’ve lost money in a stock scam. What should I do?
A Lawyer Can Represent You After an Investment or Securities Scam
If you suffered investment losses of more than $100,000 due to the misconduct of a financial advisor or broker, the securities lawyers at Meyer Wilson Werning are here to help. With over $350 million recovered for thousands of clients since 1999, our team has the experience and resources to investigate your claim and pursue recovery.
Whether you’ve been harmed by a Ponzi scheme, churning, a pump-and-dump scheme, or another type of investment and securities scam, our team is here to help.
Contact us today to schedule a free consultation and learn more about your legal options. We handle all cases on a contingency fee basis, meaning you pay nothing unless we recover money for you.
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