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Investment Fraud; What It Is and How to Spot It

On Behalf of | Aug 23, 2018 | Investment Disputes

Buffington Law Firm’s breach of contract and investment fraud attorneys have represented numerous clients who have been victimized by investment fraud. Regrettably, these cases tend to fall into a familiar pattern – a person entrusts his or her investment portfolio, which frequently represents the bulk of the client’s life’s savings, to a purported investment manager. The investment manager/advisor then promises to manage the client’s portfolio as a fiduciary. A fiduciary is someone who is entrusted with the assets of another who promises to put their client’s interests ahead of their own and act with diligence and skill for the client’s best interests.

Certainly there are many ethical and skilled investment advisors and money managers. Unfortunately, there is also no shortage of unethical persons who prey upon the unsuspecting public in order to gain control of investors’ moneys which they then proceed to loot and plunder and ultimately convert to their own use.

These perpetrators can be hard to spot. Often they have glossy, seemingly well-written “Asset Management Plans” and the like which can look very authentic. These brochures, agreements, and so forth are often plagiarized from legitimate sources and thus themselves look legitimate. Persons engaged in this type of fraud are often well-dressed, articulate and very good at what they do, i.e. gaining the confidence of trusting investors.

Once a fraudster of this type gains control of an investor’s portfolio, they typically proceed to divert the funds to their own use. While this is happening, the “investment advisor” often continues to send “account statements” to the investor, and these account statements purport to show that the investor’s account is just fine and realizing wonderful investment returns; often much better than conventional benchmarks such as the S&P 500 and so forth. Buffington Law Firm has worked cases in which defrauded investors were walking around believing that they were multimillionaires (they had the account statements to prove it) when in reality their portfolios had been plundered down to nothing. In the famous Madoff case that is precisely what happened, but that case was far from unique. Typically, the fraudulent “investment manager” submits realistic-looking year-end tax documents so that the defrauded investor is paying taxes on nonexistent gains supposedly deriving from their nonexistent portfolio.

There is one danger sign that always crops up eventually – the defrauded investor wants to withdraw funds for living expenses and the like, and the “investment manager” balks. These fraudulent investment managers can concoct an unbelievable variety of excuses for delaying and not paying these withdrawals. They can be very plausible. But there is no worse danger sign. If this happens the investor should seek legal counsel without delay – delay can be fatal in these circumstances. Once this happens the fraudulent scheme has met the definition applicable to most all fraudulent schemes – the fraudster has taken the investor’s money, and won’t give it back. That simple formula is the basic definition of almost all investment fraud.

Don’t let this happen to you. If you believe that you have been the victim of investment fraud, call Buffington Law Firm immediately for a  free legal consultation, to which attorney-client privilege fully applies. Do not delay!