Investment fraud manifests in a number of different ways. Sometimes, established financial professionals conduct a Ponzi scheme in the pursuit of personal enrichment or notoriety. Other times, financial professionals may simply misrepresent the likely returns on an investment or the risk inherent in an investment opportunity.
Their clients may then suffer catastrophic losses because of their misrepresentation or intentional fraud. Some people invest a substantial amount only to later discover that the opportunity was not legitimate. People can lose their retirement savings and other key resources due to investment fraud. These financial setbacks can prove devastating for someone’s retirement plans or standard of living.
How can the victims of investment fraud potentially recoup their losses?
Seeking support from federal authorities
When the Securities and Exchange Commission (SEC) uncovers a case of investment fraud, the government typically brings charges against the person lying to investors. A successful criminal case may lead to someone’s conviction during a trial or a guilty plea. Either scenario would likely lead to the mandatory disgorgement of ill-gotten funds. Disgorgement is the term for the government or the courts forcing an investment professional or business to rescind any proceeds obtained from fraudulent activity.
The SEC might assume control over those resources. In some cases, victims of the fraud will receive a portion of those funds. However, certain investors will have priority over others. Individuals who lost their retirement savings may be so far down the list that they do not receive any reimbursement from the SEC.
Pursuing a civil lawsuit
In scenarios where the SEC does not have the resources to compensate an individual or where prosecution is not possible or unsuccessful, the victims of investment fraud can sometimes take the matter to civil court. Someone who has engaged in fraudulent conduct may be liable for the losses their actions generated for others. In fact, it may be possible for multiple clients to work together to file a joint lawsuit against an investment firm or professional that defrauded them.
Learning about the legal options for compensation after investment fraud may help people recoup their losses and hold the right party accountable for causing financial harm.