Securities fraud

Securities fraud (sometimes stock fraud or investment fraud) is the general legal term for any type of financial fraud whereby the buyer is duped into purchasing an asset through false information. This includes:

  • Any type of insider trading or "front running," where stakeholders make trades based on non-public knowledge.
  • Pump and dump schemes, where securities are hyped and then sold off by insiders.
  • Short and distort schemes, where securities are sold short and then discouraging information is spread about them.
  • Naked short selling, where securities are sold short when the seller can't even borrow them.
  • Accounting fraud, where accountants simply cook the books.
  • Pyramid or Ponzi schemes, where new investors' money is used to pay off earlier investors while cash is skimmed off the top.
  • Dump and dilute, where stocks are repeatedly issued by no valid reason other than to take investor's money away, causing ever falling share prices due to exponential stock dilution.
  • Chop stocks. Similar to pump and dump schemes except the broker finds some (often illegal) way to get the stock at far below market value.
  • Microcap fraud or penny stock fraud. Because little information is usually available about penny stocks, they tend to be hotbeds for just about every type of securities fraud, but most often pump and dump, dump and dilute, chop stocks, and Ponzi schemes.
  • Late trading. Stock sold after 4:00 PM is to be sold at the closing price for the next day. Brokers and investors can collude to make it look as if transactions have been made before the cut-off when they haven't to take advantage of after-hours market trends.
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See Also
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