Investment Fraud Investigation
Investment fraud investigations are conducted for investors who suspect their funds may be at risk in an illegitimate or illegal offering, and for victims seeking financial recovery from collapsed or corrupt schemes.
Hudson Intelligence is a licensed investigative agency that works with law firms, financial institutions, securities regulators, federal receivers and private investors. Every investment fraud investigation is led by a Certified Fraud Examiner.
We have coordinated past investigations of investment fraud with the Federal Bureau of Investigation (FBI), Securities and Exchange Commission (SEC), U.S. Attorney's Office, and state and foreign securities regulators.
Objectives of an Investment Fraud Investigation
The primary objectives of an investment fraud investigation are to determine what actually happened – and who’s responsible – and provide assistance in recovering the missing funds.
Securities fraud, stock fraud and investment fraud are illegal practices in which investors are persuaded to enter investment contracts, or buy and sell securities, based on false or misleading information. Most investment frauds promise high returns with low risk. Their sales pitches may come unsolicited, by email or telephone, from unfamiliar companies or unregistered brokers. There is often pressure to act quickly, before the 'opportunity' disappears, leaving no time for proper due diligence before capital is committed. These criminal schemes often cause significant financial losses.
The scope of an investment fraud investigation by Hudson Intelligence will generally include:
- Fraud Examination: Investigation is conducted to confirm whether there is evidence of investment fraud or securities fraud. The nature of the scheme and the extent of losses are documented. The responsible parties are positively identified.
- Comprehensive Due Diligence: The background of the responsible parties and their companies are thoroughly investigated to identify their criminal history, professional credentials, and other relevant facts, including any pattern of past involvement with similar frauds.
- Asset Search and Financial Recovery: Assets and accounts are located to assist with restitution and post-judgment collection.
- Coordination with Authorities: If the promoter of an investment fraud scheme refuses to return client funds, the findings of the investigation can be coordinated with legal counsel, law enforcement and regulatory authorities.
Prior to initiating an investigation, we consult with clients to discuss their case and clarify the type of information they are seeking. We then set an appropriate scope and budget for the investigation. A retainer agreement is prepared, outlining the estimated cost and timeline. Upon client's approval and payment of the retainer, the investigation will proceed.
What Our Clients Say...
Identifying Investment Fraud and Securities Fraud
Most investment frauds are variations of a familiar theme. Their promoters often follow the same patterns and techniques of long-established schemes used to solicit and manipulate victims. Recognizing common types of investment fraud is essential for fraud detection, investigation and prevention.
Types of investment fraud include:
- High Yield Investments
- Microcap and Penny Stock Fraud
- Prime Bank Fraud
- Affinity Fraud
- Advanced Fee Fraud
- Pump and Dump
Fraudsters strive to create the false impression that they possess powerful insights in opaque markets. They may claim inside knowledge of an emerging industry, or promote innovative-sounding opportunities such as commodity pools, binary options, or pre-IPO stock purchases. The variations are endless. Yet even if their sales pitches seem unique, most fraud schemes involve similar strategies and tactics. The ability to recognize those red flags is a critical skill for fraud detection.
Case Study: Assisting Victims of a Global Fraud
The well-publicized collapse of an international Ponzi scheme resulted in the prosecution and conviction of its principal founder, whose failed investment firm was placed into federal receivership.
Our investigators worked on behalf of the receiver to trace the flow of fraudulent conveyances and identify recoverable assets, including many millions that had been transferred to former employees and family members.
These assets included substantial holdings in real property, bank accounts, brokerage accounts, personal trusts, family inheritances, insurance policies, company retirement plans and corporate interests.
After court-ordered attachment and execution of assets by the receiver, proceeds from the recovery were distributed to victims of the investment fraud.
Conducting an Investment Fraud Investigation
During a fraud examination, our investigators examine and document the relevant facts of the investment scheme. We identify the responsible parties and confirm their involvement through independent investigation, fact-finding and interviews. We also document the extent of financial losses.
The formal findings of a fraud examination can provide valuable leverage for settlement negotiations and recovering funds from a failed scheme. When confronted with clear and convincing evidence of their wrongdoing – and their personal liability – even the most capricious fraudsters may choose to return investor funds rather than face the prospect of career-crippling lawsuits, regulatory enforcement or criminal prosecution.
If a fraudster refuses to return funds, then the expert investigation report becomes a critical tool for civil litigation or criminal prosecution, providing an easy-to-follow roadmap of complex schemes, bolstered by expert testimony of a licensed investigator.
We have coordinated past investment fraud investigations with federal law enforcement – as well as federal, state and foreign regulatory agencies – resulting in criminal prosecution and civil enforcement actions on behalf of our clients and other fraud victims.
Comprehensive Due Diligence
Conducting comprehensive background investigations of key players – the companies and their principals – is essential for gauging the depth of corruption and misconduct in an investment fraud scheme. These insights can provide guidance for defrauded investors and their counsel in setting an appropriate strategy for legal action and financial recovery.
Comprehensive background investigations of principals will reveal any criminal records, employment history and professional credentials. Special attention is paid to any pattern of past involvement with similar frauds, including prior litigation by defrauded investors or enforcement actions by securities regulators.
Evidence of participation in past fraudulent schemes and related financial crimes can be valuable for persuading a judge or jury that a failed investment offering was not an unfortunate outcome of market forces, but was, in fact, a fraudulent program created and promoted with the intent to deceive.
This information can also be highly relevant in determining whether a formal complaint to law enforcement or regulatory agencies is merited. Cooperation of federal and state agencies may require compelling evidence that the matter merits an official inquiry within their jurisdiction.
The corporate background of any companies involved in the scheme are scrutinized for unregistered securities offerings, regulatory sanctions, bankruptcies, litigation and judgments. The investigation will also determine whether the companies are legally organized as corporations, limited partnerships or LLCs – and identify their corporate parents, affiliates, subsidiaries and principals. Sophisticated frauds may involve several layers of shell companies, while other schemes use fictitious and fabricated company names to create a false impression of scale and legitimacy.
Financial Recovery for Investment Fraud Victims
Hudson Intelligence has led asset search and asset discovery efforts for victims of major international investment frauds. Our investigators have located assets totaling more than $300 million. We identify domestic, foreign and offshore holdings, including bank and brokerage accounts, business interests, real property, luxury vehicles, airplanes and other assets.
For more information on our global capabilities in locating and tracing assets, please visit the Asset Search section of our website.
Consult an Investigator
If you would like to discuss an investment fraud investigation, please complete the form below. You can also speak with an investigator by contacting our offices at 800-580-8755.