Investments can be both fun and financially lucrative. However, it’s important to remain diligent. Brokers may expose themselves to conflicts of interest, some legal and some illegal. It’s not only the investor but also the broker, adviser, and member firm which stand to profit off of the investor’s hard-earned money. Be wary of brokers who make unqualified guarantees. All investments have some inherent risk. Investors should be skeptical about brokers who make performance guarantees about investment products. Continue reading
Unfortunately, the realm of investments and personal finance involves many different forms of nefarious activity. Fraudsters quickly adapt to the changing financial policies, oftentimes using technology to take advantage of the naivety of unsuspecting victims.
Schemes involve major enterprises such as pyramid schemes, Ponzi schemes, fake check fraud, recovery schemes, and pump and dumps. Other fraudulent activity may be less organized on a smaller, tactical scale. Phantom riches, source credibility, social consensus, reciprocity, and allusions of scarcity are all methods in which fraudsters, tortfeasors, and ill-reputed financial advisers convince investors to part with their money.
Fake check fraud happens where a victim is convinced that they’ve won a contest and just need to wire money to the fraudster in exchange for a check, which is, you guessed it, fake. In a pump and dump scheme, fraudsters attract investors to a stock, and once the price increases based on the increased interest, the fraudsters sell off their shares.
Sometimes fraudsters will embellish facts to mislead investors. By appealing to the investor’s values, fraudsters will trick investors into believing the investment is more credible, profitable, and well known than it actually is.
Phantom riches involve fraudsters attracting investors by promising unrealistic wealth, dangling financial bliss in front of the victim. While source credibility tricks work by name-dropping a well-known firm or an expert, social consensus works by suggesting that lots of people trust the investment, respectively. Reciprocity involves the fraudster promising something in return for investing.
Vigilance, education, and a healthy dose of skepticism are simple ways in which investors can protect their money. It is important to remember that not only laymen become victims of these schemes, but also professionals such doctors, lawyers, and business men and women. Con artists and shady brokers are experts in finding ways to separate money from their victims. Diligently follow-up on investment opportunities before providing any financial information.
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Ben Dell’Orto Fall 2018 IAC Student Intern
Even in the cutthroat world of investing, it doesn’t get much more morbid than “betting on death.”
A viatical settlement, also called a life settlement, is an investment where the purchaser buys a person’s life insurance policy. The insured individual needs money, frequently for a medical treatment, and accepts a sum less than the value of the policy from the investor. The investor also doesn’t necessarily have to purchase the whole policy, as brokers often split the policy among multiple investors, allowing investors to minimize risk by purchasing a smaller portion of several policies. Continue reading
By: Eddie Greenblat, Fall 2018 IAC Student Intern
Who hasn’t cried at that Sarah McLachlan commercial? You know, the one with all of those cute kittens and puppies that need homes? I’m not a pet person, but every time that commercial comes on my television I’m ready to become that guy with 10 dogs. But then I come to senses, remember I’m allergic to pets, and I’ll occasionally donate to ASPCA.
When people see tragedies, the instinct is to help those in need. Hurricane Lane recently ravaged Hawaii. Not only did Hurricane Lane cause massive water damage, it also resulted in a huge brush fire in Maui County. The Maui County mayor called the fire “one of the worst fires we’ve ever had.” Natural disasters spark huge relief efforts to help the victims. For example, NFL player J.J. Watt started the Houston Flood Relief Fund after Hurricane Harvey. Watt raised a total of $37 million dollars to help the citizens of Houston rebuild. Charities like Watt’s are legitimate, and donating to them is great, but people often don’t know where they send their money. Continue reading
By Edward Greenblat, Fall 2018 Investor Advocacy Clinic Student Attorney
Nobody likes writing out an IOU. But, if investors aren’t careful with their ICOs, they could end up writing a bunch of IOUs.
ICOs or Initial Coin Offerings have become a popular way for people and businesses to raise money or start investing. But what are ICOs? An ICO is a form of cryptocurrency, which is a “digital representation of value that can be digitally traded and functions as a medium of exchange, unit of account, or store of value.” In layman’s terms, an ICO is electronic money that can be traded online. Continue reading
By Abigail Howd, Spring 2018 IAC Student Intern
Prior to taking the clinic’s prerequisite class, I knew next to nothing about investing. I saw the direct effects of the 2008 recession because my parents were real estate agents with their own investment properties. Beyond that, I paid little attention to the upwards or downwards trends in the stock exchanges. I had heard of the Securities and Exchange Commission, but I must admit, I did not know what it did or what securities were. Even during my time between college and graduate school when I had a fulltime job, investing was never on my mind. I was too focused on paying down my student loans. Investing sounded like something people with a lot of money did for fun to get more money. I knew it could pay off, but it could also be extremely risky.
After taking the class and working in the clinic, I know I was right about something—investing can be risky. However, I was wrong about who invests and why. Our clinic helps investors from all walks of life who have smaller-dollar claims and who could not otherwise afford legal representation. They have many different reasons for investing. Some are planning for retirement, others are trying to help their children attend college, and still others are simply using investments as an additional form of income. Regardless of how much money people invest or their reasons for doing so, the important part is that whomever they entrust with their money has their best interests at heart.
I have learned a lot about securities and the various laws and rules that govern them in the past year. In doing so, I discovered that even knowing the bare minimum, I could help people. I learned that I do not always have to know the answers right away. I just need to know how to find the answers when I need them. My favorite parts of clinic were helping people recover their hard-earned money and realizing how quickly I could absorb a whole new field of law. I am proud of all the things my team was able to accomplish over the semester. Mainly, I am grateful for the opportunity to develop my professional identity while working on real cases and helping real people.
By Ben Dell’Orto, Spring 2018 IAC Student Intern
Whether you’re slightly confused as to what Bitcoin is, or are kicking yourself for forgetting the password to your “Bitcoin Wallet,” cryptocurrencies are a popular subject lately. Two alleged fraudsters in Dallas, Texas thought they could capitalize on this popularity—and people’s lack of expertise on the subject—in creating an alleged scam Initial Coin Offering (ICO).
According to the SEC, Jared Rice Sr. and Stanley Ford founded AriseBank, which they claimed was a new type of “decentralized” bank, which offered investors “banking products and services using more than 700 virtual currencies” such as Bitcoin, Bitshares and Dogecoin. The pair allegedly claimed that the funds were raised through an algorithm that automatically traded in the cryptocurrencies. AriseBank also allegedly told customers that it had bought an FDIC-Insured bank which allowed it to provide “customers the ability to obtain an AriseBank-branded VISA card to spend any of the 700-plus cryptocurrencies.” Continue reading