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Investment Fraud

Join a Securities Class Action Claim with the Help of an Investment Fraud Attorney 

Investing your money is often seen as a wise idea to plan for the future. Sometimes, an investor may lose on their investment simply due to the turbulent markets. Others, however, may suffer due to fraud on behalf of a broker, investment firm or other individual or corporation. If you suffered a loss that you believe to be a result of fraud, contact an investment fraud attorney at our firm to see if you may be eligible to join others facing similar losses in a securities class action lawsuit. 

Fund-Related Fraud

Investors have many choices when deciding where to invest their money. Two of the most common and popular types of publicly traded investment vehicles are mutual funds and hedge funds. Mutual funds are the most common type of managed fixed income or equity investments used by today’s investors. Mutual funds receive money from individuals, companies, non-profits, and other organizations with common investment goals and pool the money together to purchase different assets—such as bonds or stocks—for the entire group. This pooling of money and relying on a manager’s expertise to invest the pooled money allows the members of the pool, who are often investing laymen, to meet investment goals without having to actively manager their own investment. Hedge Funds also take a pooled approach to investing, but are generally distinct from mutual funds because they are limited to accredited and sophisticated investors. Due to the additional requirements needed for an investor to earn a qualified investor status, hedge funds face less regulation than mutual funds. This lessened scrutiny from the SEC allows hedge funds to take a riskier and more leveraged approach to their portfolios.

But in the end, even though mutual funds and hedge funds are different, the SEC still strictly regulates both types of funds. The SEC prohibits the firms managing these funds from making knowingly false or misleading public statements and requires both types of funds to follow strict filing requirements. Violations of the mandatory filing requirements or the dissemination of false statements may make the funds liable to its investors for losses stemming from these false filings and statements—just as publicly traded companies in other industries may be held liable for their knowingly false statements. Common examples of misrepresentations in the context of funds include: misrepresenting the fund’s investment strategy, misrepresenting the capital structure of the fund or the assets under management, and falsified performance metrics—often presented through client presentations, marketing materials, SEC filings, or other communications. It is important to note that the above list is not exhaustive and that a fund member may have a claim against the fund if the firm managing the fund knowingly or recklessly disseminated any information to the pubic that was both false and of the type likely to affect an investor’s decision to enter, exit, or maintain their position in the fund. Depending on the nature of the misrepresentation investors in these funds may be able to recoup their losses stemming from their reliance on a fund’s misrepresentations.

Unfortunately, due to the nature of this harm and the type of investors that make up these funds (especially mutual funds), it is often difficult to figure out when an incorrectly-made statement or filing rises to the level of securities fraud. Seeking the opinion of an investment fraud attorney can help interpret and navigate these often confusing waters. If you believe a fund has issued false or misleading statements, please contact Glancy Prongay & Murray.

Ponzi Schemes

A Ponzi scheme is a fraudulent investing scam in which new investments are used to pay off earlier investors, which creates the appearance that the investment is profitable. In such schemes, an investor is lured into investing money with the promise of high rates of returns with little or no risk. This process continues until no new investors can be found or a large number of investors ask to cash out, and the whole scheme collapses.

The original Ponzi scheme was conducted by a man named Charles Ponzi in 1919, who promised returns of 50% in 45 days or 100% in 90 days if they invested in his postage stamp scheme. The scheme lasted until 1920, and by then people had invested $2.5 million in Ponzi’s scheme. When the scheme collapsed, it turned out that Ponzi had only ever purchased around $30 worth of mail coupons. More recently, Bernie Madoff executed the largest Ponzi scheme in history, in which he defrauded thousands of investors of tens of billions of dollars over at least 17 years. In this scheme, Madoff promised large, steady returns, but instead he deposited client funds into a single bank account, which he used to pay clients who wanted to cash out. However, when he could no longer attract new investors or capital in late 2008 he was forced to reveal his scheme.

A Ponzi scheme may give rise to liability under a number of securities laws including the antifraud provisions the Securities Exchange Act of 1934, as well as the Investment Advisers Act of 1940. Additionally, liability may arise under common law torts such as negligence, negligent misrepresentation, and fraud. Navigating the often complex factual nature of these cases and the variety of securities laws takes a skilled securities fraud attorney.

Some common red flags to look for include: (1) promises that your investment will generate high returns, especially any “guarantee” given that your investment will generate returns; (2) investment returns that do not reflect overall market conditions and that are consistently generating positive returns; (3) an investment that is not registered with the SEC or with state regulators; (4) the investment professional and/or firm is not licensed or registered; (5) the investment is difficult to understand or is shrouded in secrecy; (6) you are given reasons or excuses why you can’t review information about your investment in writing, and/or there are account errors and inconsistencies in the information about your investments; and (7) you have not received a payment or have had difficulty cashing out your investment. If you have seen any of these warning signs or otherwise suspect that you may have invested in a Ponzi scheme, please contact an investment fraud attorney at Glancy Prongay & Murray.

REIT-Related Fraud

A real estate investment trust, or “REIT”, is a specialized entity that owns and often manages income-producing real estate. Many REITs are publically traded, but there are also non-traded REITs.

Brokerages and investment firms market non-traded (or private) REITs as secure and stable investments with high-yield dividends. However, they often have large up-front costs, ongoing fees, and are not traded on a public exchange, which makes them very difficult to sell should an investor decided to cut his or her losses.

In recent years, misleading or dishonest disclosures regarding REIT valuations have been a prominent issue, gaining the attention of many securities class action attorneys. When persons selling REIT shares issue misleading information to entice investors, an investment fraud attorney may initiate a securities class action lawsuit on investors’ behalf, seeking to recover their losses. Potentially actionable behavior is not just limited to statements regarding valuation, but may also arise from statements that cause investors to anticipating higher than realistic returns.

REITs are complex, and require deep knowledge of the asset class in order to understand any particular REIT’s structure, and determine whether any of the various entities involved engaged in legally actionable conduct. Investors that are victim of a fraudulent REIT require a securities litigation attorney with comprehensive institutional knowledge in order to evaluate all possible legal claims and to navigate the best strategy towards a speedy and just resolution.

If you purchased shares of a REIT (publicly traded or not), and have concerns regarding information provided by those marketing the REIT, please contact the securities fraud class action attorneys at Glancy Prongay & Murray.

Broker Misconduct

Broker fraud and negligence generally falls into two categories (1) self-dealing and (2) failure to make suitable investment decisions for a customer. Claims involving broker misconduct are typically arbitrated before the Financial Industry Regulatory Authority (“FINRA”). The most common claims that we have seen involve misrepresentation and omissions, unsuitability, overconcentration, churning, failure to execute trades, failure to supervise, breach of promise/contract, and breach of fiduciary duty.

The rules, regulations and standards governing securities transactions are complicated. Consequently, a variety of abusive and unsuitable conduct may be occurring or may have occurred in your brokerage account without you having the slightest notion that wrongdoing may have taken place. Glancy Prongay & Murray’s investment fraud attorneys have substantial experience and knowledge representing investors who have lost money due to the negligence and misdeeds of their stockbrokers and financial advisors and the failure to supervise by their broker-dealers.

Contact an Experienced Investment Fraud Attorney Today

If you’ve lost a lost of money and suspect fraud on behalf of your broker or others, you may not be alone. Schedule a consultation with an investment fraud attorney at our firm to see if you may be part of securities class action lawsuit. Call or complete our online form today. 

Court Recognition

“And without question, the Court is of the opinion that the value of benefit that’s been conferred to the class is extremely sizable and that this Court is certainly aware that the skill and efficiency of plaintiff’s counsel is what attributed to this settlement, and they are learned securities counsel. The Court is mindful of that, and as a result they were able to sort of weed their way through the complex issues in this case, and also to bring this about — bring about a settlement rather in short order as these matters go. So the Court certainly attributes that to counsel’s skill and efficiency, as well as the ability to work with the adversaries in this matter.”

–Hon. Susan D. Wigention, U.S. District Judge, District of New Jersey

“Class Counsel has conducted the litigation and achieved the Settlement in good faith and with skill, perseverance and diligent advocacy”

— Hon. Donovan W. Frank, U.S. District Judge, District of Minnesota

“The court finds that the Settlement Fund… created by Class Counsel is an exceptional result… The settlement is significantly above the average securities class action settlement when measured as a percentage of losses recovered… The court finds that Class Counsel, particularly Co-Lead Counsel, exerted tremendous effort on behalf of the class in the prosecution of this action… The Court finds that Class Counsel skillfully prosecuted this action, particularly given that this case was unusually complex relative to most securities fraud class actions. ”

–Hon. Dickran M. Tevrizian (Ret.), U.S. District Court Judge, Central District of California

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