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Connecticut Securities, Commodities and Investor Fraud Task Force

Securities FraudA Basic Overview

The nation’s economy is increasingly dependent on the success and integrity of the securities and commodities markets. As a result, the FBI diligently investigates criminal activity in the markets and against investors whenever it arises. 

Definition

The term securities fraud covers a wide range of illegal activities, all of which involve the deception of investors or the manipulation of financial markets.

  • High Yield Investment Fraud
  • Ponzi Schemes
  • Pyramid Schemes
  • Advanced Fee Schemes
  • Foreign Currency Fraud
  • Broker Embezzlement
  • Hedge Fund Related Fraud
  • Late Day Trading

 

Common ScamsBe On the Lookout for Fraud

High Yield Investment Frauds

  • They are characterized by promises of high rates of return with little or no risk.
  • They may involve various forms of investments (e.g. securities, commodities, real estate, precious metals, etc.).
  • They are “too good to be true” investment opportunities.
  • Perpetrators may contact victims by telephone, e-mail, or in person.
  • The offers are generally unsolicited.

Ponzi & Pyramid Schemes

  • They use money collected from new victims to pay the high rates of return promised to earlier investors.
  • Payouts give the impression of a legitimate, money-making enterprise behind the fraudster’s story.
  • In reality, investors are the only source of funding.

Advance Fee Schemes

  • Victims advance relatively small sums of money in the hope of realizing much larger gains.
  • Gains never materialize because there is no legitimate underlying investment.
  • To participate a particular investment opportunity, victims must first send funds to cover “taxes” or “processing fees.”
  • After victims send the “fees,” the perpetrators appropriate the funds and never deliver on the investment.

Protect YourselfHow You Can Avoid Becoming a Victim  

Identify the warning signs

  • Does the offer sound too good to be true?
  • Is the seller using high pressure sales tactics?
  • Was the investment offer unsolicited?
  • Did the seller ask for information that is usually considered personal (e.g. social security number, credit card information, etc.) over the phone or Internet?
  • If you answer “yes” to any of the above questions when considering an investment opportunity, you may be the target of a scam artist.

Take action to avoid fraud

  • Don’t believe everything you are told by the seller. Take the time to do your own research on the investment’s potential.
  • Don’t assume the solicitor is who he or she claims to be.
  • Check with federal and state securities regulators to find out if there have been any complaints against the company.
  • Ask the promoter whether—and how much—he or she has been paid to tout the opportunity.
  • Ask where the company is incorporated and then call that state to ensure that the company has a current annual report on file.
  • Request written financial information, such as a prospectus, annual report, offering circular, or financial statements, then compare the written information to what you were told.
  • Get offers in writing and save a copy for your records.
  • Check with a trusted financial advisor, your broker, or an attorney about any investments you are considering.

Report scams when they occur

  • Don’t be embarrassed.
  • File a complaint with the Securities and Exchange Commission, state securities regulator, or a law enforcement agency.
  • Report the crime promptly—you’ll have a better chance of getting your money back if you do.

To Submit a Tip to the Connecticut Securities, Commodities and Investor Fraud Task Force

Call 203-777-6311 or send an e-mail to: CTSecuritiesFraud@ic.fbi.gov.