What Are the Types of Securities Fraud ?

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Securities fraud takes on many forms. In fact, there is no shortage of methods used to trick investors with false information. High-yield investment fraud, for example, may come with guarantees of high rates of return while claiming there is little to no risk. The investments themselves may be in commodities, securities, real estate, and other categories. Advance fee schemes can follow a more subtle strategy, where the fraudster convinces their targets to advance them small amounts of money that are promised to result in greater returns.

Sometimes the money is requested to cover processing fees and taxes for the funds that allegedly await to be disbursed. Ponzi and pyramid schemes typically draw upon the funds furnished by new investors to pay the returns that were promised to prior investors caught up in the arrangement. Such schemes require the fraudsters to continuously recruit more and more victims to maintain the sham for as long as possible.

One of the newer types of securities fraud is Internet fraud. This type of scheme is also referred to as a “pump-and-dump” scheme, in which people use chat rooms and forums to spread false or fraudulent information concerning stocks. The intention is to force a price increase in those stocks—the pump, and then once the price reaches a certain level, they sell them off—the dump.

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