What are the different types of investment fraud?

Investment fraud is a type of financial crime in which an individual or group misleads investors into providing money with the promise of a high return. In Washington, the Securities Division of the Department of Financial Institutions regulates and investigates investment fraud. There are several types of investment fraud that individuals and groups may use to deceive investors. One type of investment fraud is a Ponzi scheme. This is when an individual or group takes money from newer investors to pay returns to earlier investors, without actually investing the funds. In Washington, Ponzi schemes are considered securities fraud and subject to criminal penalties. Another type of fraud is stock manipulation. This is when an individual or group tries to influence the market for stocks, either by spreading false information or buying and selling stocks outside of legitimate exchanges. An example of stock manipulation is a “pump and dump” scheme, in which the fraudsters use false or misleading information to drive up the stock price and then sell their shares for a profit. Insider trading is another form of investment fraud. This is when someone uses inside information to buy or sell stock to make a profit. Insider trading is illegal because it gives certain individuals or groups an unfair advantage over other investors. Finally, unauthorized trading is when a stockbroker trades on behalf of a customer without their knowledge or permission. This can be done intentionally or unintentionally, but it is illegal and can result in financial losses for the customer. Investment fraud is a serious financial crime and anyone in Washington who suspects they may be a victim of fraud should contact the Securities Division of the Department of Financial Institutions.

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What are the different types of investment fraud?

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