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Retail investors at risk of financial loss from securities fraud

On Behalf of | Mar 4, 2021 | FINRA, Securities Law And Litigation |

Owners of small, family businesses and individuals at various levels of wealth often invest their money in stocks to secure their futures and protect their families. The unfortunate truth is that these retail investors face some risk of becoming the victims of fraudulent investment schemes or unsuitable investment advice that has the potential to wipe out their account balances.

Examples from a recent case

The U.S. Securities and Exchange Commission (SEC), the main federal agency enforcing securities laws, recently issued a news release about a Connecticut investment advisor (IA) who pleaded guilty in federal court to securities fraud in a long-running scam, swindling more than $4 million from dozens of unsuspecting retail investors. The court sentenced him to significant prison and supervised-probation time as well as almost $5 million in forfeiture to the government.

In a U.S. Department of Justice (DOJ) press release, the agency indicated that the court would order restitution later, so the victims may be reimbursed for money wrongly taken.

In a related SEC lawsuit, the court banned him from committing future securities fraud. Previously, the SEC had ordered that he not associate with other advisors, dealers, brokers or transfer agents, or become involved with penny-stock offerings (usually stocks of small corporations with very low prices).

Stories of the victims

The IA who committed these acts told retail customers that he would invest their money in solid, safe investments, but instead he used the money for his own expenses and even at casinos. To conceal his theft, he created fictitious account statements for these customers. He also used new-client money to pay previous clients when they asked for withdrawals.

His victims over many years included:

  • An elderly widowed relative who gave him $600,000 to invest from her deceased husband’s pension
  • A father who paid $60,000 of money saved for a child’s college expenses
  • An older investor gave $18,000 from an annuity meant to care for his sibling with disabilities
  • A couple transferred over $1 million to invest for their retirement

Key takeaways

Customers seeking investment advice should be cautious as investment advisors like this one may target people without financial backgrounds and elderly people. Anyone who suspects any kind of investment scam or feels that their IA has been suspicious, unethical, inconsistent or shady should speak with a securities attorney. Legal counsel can launch an investigation into the circumstances and analyze potential legal remedies such as lawsuits or arbitration options like those before the Financial Industry Regulatory Authority (FINRA).

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