Investing Resources

Avoiding Scams

What is “investment fraud”?

Investment fraud, also known as securities fraud, is the practice of trying to deceive a potential investor into buying or selling a security by providing the potential investor with false, misleading, or exaggerated claims pertaining to the investment’s return, profit potential, and/or price, among many other practices, in violation of various securities laws. Types of fraudulent activity may include stealing money outright from investors (embezzlement); manipulating a security’s price; misstatements or false statements of a security’s financial reports; and providing false information to a corporate auditor. They may also include insider trading, whereby someone closely linked to a security attempts to profit from information accessible only within the company. Another type of fraud and abuse may include the creation of a fake or “dummy” corporation, wherein the criminal attempts to sell shares in the fake corporation or investment scheme.


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