Business fraud is a major problem here in Texas and throughout the United States. This is why there are numerous state and federal agencies that are designed to protect shareholders and other investors, like the federal Securities and Exchange Commission and the Texas State Securities Board. These agencies work hard to protect investors from various financial frauds that can harm or destroy their personal net worth. Nevertheless, each year thousands of people fall victim to business fraud. This is why it is crucial to understand the scope of the problem, and to take steps to protect yourself and your investments. An excellent first step is to work with an experienced Texas business attorney, who can help you avoid getting caught by a scam artist.
Business fraud is a widespread problem.
The Federal Trade Commission recently reported that investment scams alone cost American shareholders and investors over $4.6 billion in 2023. This was the largest component of the over $10 billion for all fraud claims in the United States. Texas was not spared from this, with the FBI finding that investors in the Lone Star State lost over $1 billion to such scams in 2023. Texas led all states in this category, showing the impact that business fraud can have on investors here.
This alarming trend highlights the growing threat of investment fraud, particularly in Texas. You must remain vigilant and exercise caution when considering investment opportunities, especially those that promise high returns with minimal risk. It is crucial to conduct thorough research, verify information from multiple sources, and consult with trusted financial advisors before making any investment decisions.
How does business fraud happen?
When you make an investment, your goal is to multiply your net worth by getting returns from the company into which you invested, either as dividends, interest payments, or increased capital when you sell the investment. The plan is to protect your money while growing it. Simply holding onto the money without investing it will see your net worth eroded by the effects of inflation. Many investors choose to put their money into bank savings accounts and CDs, which are protected by the FDIC up to $250,000, and can go higher under certain circumstances. But CDs are not liquid, meaning you have to tie up your investment for a number of months, while bank savings interest rates tend to be below the rate of inflation. This is why so many people look for investments that have the potential to pay more in dividends, interest, and growth.
Scam artists play upon these fears by promising lavish returns on investment. This may come in the form of high dividend rates for corporate stock, large interest payments for debt based investments, and inflated stock prices. However, in the case of a Ponzi or pyramid scheme, all the scam artist is doing is taking the most recent investors’ money and using it to pay the older investors, creating the false impression of a profitable business. Eventually, the Ponzi schemer runs out of potential investors, and the scam collapses, leaving most of the people who invested or lent their money broke. Worse, early investors who received more from the scam than they invested may be subject to claw backs of the false profits, even if they had no knowledge that the investment was a sham.
What can you do to protect yourself?
There are things you can do to protect yourself from business fraud. The key is to always keep in mind that if something sounds too good to be true, it probably is. This is why you should always have your guard up when you are considering a possible investment.
Before you make an investment, you should retain the services of a reputable broker. He or she will help you determine whether the investment is suitable for you, and should have licenses issued by the Securities Investor Protection Corporation (SIPC). This is a non-profit organization that works alongside the Securities and Exchange Commission, licensing brokers and protecting customers like you. The SIPC website has excellent information and is a resource for checking to see if the person you are dealing with has the proper licenses.
You should also do your own homework. Get as much information about the potential investment, and either read it yourself or have a trusted attorney or accountant review it on your behalf. The cost will be well worth it in the long run. This is all part of doing your due diligence. The Texas State Securities Board is also a great resource. You can find out if the investment is properly registered, and if there are any open investigations on the company itself.
If you are currently an investor or shareholder in a business and suspect that you may have been the victim of fraud, you can contact the Securities and Exchange Commission, the Texas State Securities Board, and SIPC. Each of these agencies and organizations has an enforcement department that investigates possible business fraud and brings civil actions to recover funds for investors who have been harmed. In addition, each is empowered to refer cases for criminal prosecution. You can also retain the services of an experienced business fraud attorney to bring a lawsuit on your behalf against the company and individuals who defrauded you.
If you have been defrauded by a company in which you invested or are holding shares, contact our firm today.
Business fraud can be a very costly and emotionally draining matter. This is why the experienced business law attorneys at Ryan G. Cole Law can assist you with your business fraud claims, helping you recover the funds you invested.