Most Common Investment Frauds

Over time, investment schemes and fraud have only become more challenging to detect. From Ponzi schemes and pyramid schemes to trading scams and cryptocurrency fraud, investment fraud has evolved into a massive category of criminal activity. With more and more economic uncertainty, it’s not unusual for people to seek out new, passive ways to multiply their disposable income. In some cases, these opportunities can, in fact, be investment scams. To recognize the signs of fraud and to learn how to combat fraud with criminal defence or civil litigation, book a lawyer consultation with Karrass Law. Our criminal defence and civil litigation lawyers are experienced with both civil and criminal fraud. Our team of legal experts with a proven success rate can help you file a civil suit, defend yourself in civil court, or fight criminal charges with robust legal representation. For more legal advice, book a complimentary consultation with our fraud lawyers. 

Here’s a simple guide to the most common investment frauds and how to recognize the signs. 

Ponzi Schemes

One of the most infamous types of financial fraud in Ontario, Ponzi schemes operate by using money from new investors to pay returns to earlier investors rather than generating actual profits. The person running the scheme convinces investors that their money is being put into a legitimate business, investment, or financial product. At first, payouts seem real because the perpetrator is giving you a payout with the money of other investors. This immediate payout is used to attract even more people to invest. However, because no real investment exists, the scheme will eventually collapse when there aren’t enough new investors to cover withdrawals from investors. By the time the fraud is exposed, most investors lose everything. If you suspect that you have invested in a Ponzi scheme or you are complicit in a similar type of investment fraud, contact a defence lawyer at Karrass Law to explore your personal legal options. 

Affinity Fraud

An extension of other types of investment fraud that can be encountered is affinity fraud, which is where perpetrators of a scheme target people within close-knit communities. Scammers use religious groups, cultural organizations, or social circles to gain trust before convincing victims to invest in fraudulent schemes. Because the scammer is often a respected member of the group, victims are less likely to question the investment. These scams can go undetected for years, leaving entire communities financially devastated. If you suspect you’ve been targeted, seeking legal advice right away from the fraud lawyers at Karrass Law can help you determine whether you have a case for civil litigation. 

Pyramid Scheme 

Pyramid schemes rely on money from new recruits rather than actual business activity. Participants are promised huge returns if they bring in more people. The problem is that these schemes are unsustainable. Only those at the top make money, while everyone else is left with financial losses. Many pyramid schemes disguise themselves as multi-level marketing businesses, but the key difference is that real MLMs sell products, while pyramid schemes focus on recruitment. In Ontario, pyramid schemes are illegal, and those who operate them can face criminal charges.

Mortgage Fraud

Mortgage fraud is another type of investment scam that continues to trap unsuspecting victims. Fraudsters may convince people to invest in real estate projects that don’t actually exist or pressure buyers into fraudulent mortgage agreements. One example is a straw buyer scheme, where someone with good credit is recruited to apply for a mortgage on behalf of another person. The fraudster promises to make payments but disappears, leaving the straw buyer stuck with the debt. Other scams involve fake real estate deals, where scammers take deposits for properties they don’t own. In Ontario, mortgage fraud can lead to serious legal consequences, including civil lawsuits and criminal prosecution.

Cryptocurrency Fraud

The Canadian Government warns the population of the increasing risk of fraud as it pertains to crypto, which has become more popular in the last few years as digital currency has gained popularity across Ontario. Many people don’t fully understand how crypto works, making it easier for scammers to promote fake coins, fraudulent trading platforms, or pump-and-dump schemes. In a pump-and-dump, fraudsters hype up a cryptocurrency to drive up its price, then sell off their holdings at a profit while everyone else loses money. Since cryptocurrency markets are less regulated than traditional investments, recovering lost funds can be difficult. However, victims of crypto fraud may still have legal options. To learn more about what actions you can take in response to cryptocurrency-related fraud, talk to a trusted and reputable fraud lawyer. 

Signs of an Investment Scheme

The best way to mitigate the negative effects of fraud is to spot the signs of a scheme. If you notice any of the following indicators of fraud, talk to a professional, trusted expert or advisor for a second opinion. If you suspect fraud, report it to an official authority. 

• The promise of high returns with minimal risk: Any investment opportunity that is both high-return and low risk is a red flag for fraud as there is no opportunity that would offer that combination. Rather, in genuine investment opportunities, high-risk investments offer high returns, while low-risk opportunities yield low returns. 
• Hot tip or insider information: More often than not, the people spreading insider information or hot tips related to investments are not looking out for your best interests. Rather, they are involved in perpetuating the scheme. To protect your interests, it’s recommended to wait on acting on the information and to remember that if it is, in fact, inside information about a public company, it would be illegal to act on it under insider trading laws.
• Intense pressure to buy: The best decisions are made in a calm state of mind, as calmness offers clarity. If you’re feeling pressure or you’re torn between investing or not investing, then you may be rushing into your decision. Because quick decision-making supports fraudulent agendas, many scammers rely on high-pressure tactics to get you to hand over your money. If you’re being asked to make a decision in a short timeline, the opportunity may not be financially sound. 

Be Aware of Investment Fraud and Defend Yourself with the Karrass Law Team

If you find yourself wrapped up in a scheme and are facing the legal implications, talk to the experts at Karrass Law. With many years of experience and working successfully on a variety of fraud-related cases, Robert Karrass and our team of legal experts can help you get the best results possible. When you’re working with our legal team, you are in a judgment-free zone where our experts are committed to your case and your best interests. 

To learn more about Karrass Law and get personal legal advice, book a complimentary consultation. 

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