Investment fraud schemes can come from places you least expect. According to a release from Financial Industry Regulatory Authority (FINRA), Ruth and Len Mitchell were defrauded by their neighbor and friend. They were unaware that he was running an $11 million Ponzi scheme. The Mitchells placed their trust in this man, let him keep their books and even had him do their personal taxes. The Mitchells knew that their neighbor ran an investment company, which is why they trusted his advice to invest $13k in real estate bonds. Unfortunately, a man who claimed to be their trusted friend turned out to be a man out for their money.
This is just one example of a larger problem. Far too often, fraudsters attempt to build personal relationships with people solely for the purpose of stealing their hard-earned money. According to the FINRA), this tactic is common enough to have been given a name: source credibility. This particular scheme also involves something called social consensus. Many of the Mitchells friends and others in the community were defrauded by this man. The idea that "everyone else was doing it" made it seem safe when it was not. Even when you feel secure in your investments, be discerning. Many investment fraud schemes begin with a false sense of security.
FINRA gives three steps that every investor should take to avoid this particular type of investment fraud:
Meyer Wilson is a team of investment fraud lawyers dedicated to recovering your money lost as the result of investment misconduct. Investment fraud schemes like this are unfortunate, but they do happen. If you lost a significant amount of money due to investment firm or financial advisor misconduct, then call us today.