When I read a headline today in InvestmentNews that said “Financial Fraud is Rampant but Most People Can’t Spot It,” I wasn’t surprised. Because we only handle investment fraud cases with losses of $100,000 or more, most of our clients are savvy, sophisticated men and women. We have represented lawyers, doctors and bank vice presidents.
So how do all these fine, educated people find themselves the victims of affinity frauds, Ponzi schemes and other types of investment fraud? Some would argue “greed.” There may be some truth to that but we think there is more. (InvestmentNews quotes a recent survey from the FINRA Investor Education Foundation. That survey found that 40% of the survey respondents thought an investment with an annual return of 110% was “appealing”.)
In our experience, the investment frauds that usually rope in educated victims are those that offer more modest “guaranteed” returns or claim that one’s principal can never be touched. The biggest fraudster and Ponzi scheme crook of all time is Bernie Madoff. He didn’t rake in billions by promising ludicrous rates of return. Instead he offered a proven track record of consistent 12% returns.
Truly shocking in the survey was the level of underreporting by victims. Most people who lost money in some type of investment fraud wouldn’t even admit to being victims. Of those that did, less than half bothered to report the fraud. Apparently,many are too embarrassed to come forward, don’t know where to go for help and/or don’t think it will matter if they do report.
We are the first to admit that sometimes recovering money can be impossible. Victims’ money that is gambled away, for example, can be hard to recover. A good fraud recovery lawyer knows where to look and can often find third parties who bear responsibility for the fraud. Banks, stockbrokers and auditors, for example, are sometimes liable for not performing proper due diligence or for negligently performing an audit.
The moral of this story? Be always diligent before you invest. If you still find yourself the victim of an investment fraud, don’t be embarrassed or give up hope. The earliest investors to the courthouse and those with good lawyers are often able to recover much or all of their hard earned money.
If you think hiring a lawyer is nothing more than throwing good money after bad, think again. In many instances these types of cases can be handled on a hybrid or contingent fee basis.
About the author. Brian Mahany is a lawyer representing victims of investment fraud and accounting malpractice. Brian can be reached at or by telephone at (direct). He also publishes a daily blog, Due Diligence, that has hundreds of text searchable posts about tax and fraud law stories.
Posted by Brian Mahany, Esq