Investment Fraud Lawyer Blog

The Securities and Exchange Commission has charged an Illinois-based advisor with selling fictitious securities via social media. Anthony Fields, CPA, doing business as Anthony Fields & Associations and Platinum Securities Brokers offered over $500 billion of phony securities through a variety of social media sites, including using LinkedIn discussions to promote nonexistent “bank guarantees” and “medium-term notes.” Many potential buyers indicated they were interested.

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Many investors in alternative investments are in for unpleasant surprises. Alternative investments are very popular these days, as traditional stock and bond investments are not doing well. Alternative Investments include a wide variety of investments that fall outside the traditional stock and bond categories. Examples include structured products (such as principal protected notes and reverse convertibles); hedge funds; private equity; nontraded REITs; niche, leveraged, inverse leveraged, and synthetic exchange traded funds; and many others.

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Investors should use extreme caution before investing in alternative investments. Alternative investments have become the popular “investment du jour" but these investments are fraught with risks. Simply stated, alternative investments are not the panacea that so-called experts represent them to be. For the reasons discussed below, investors need to be very skeptical of any recommendation encouraging them to invest in alternative investments.

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Brokers often pitch alternative investments when the stock market is declining and returns on traditionally safe investments are too low. A few alternative investments may have some merit. Many more are flawed, bad and ugly in that they provide investors little more than uncompensated high risk. Then there are those that cross the line into the realm of the outright fraudulent. Unless the brokerage firm is itself a criminal enterprise, brokers often try sell fraudulent investments away from the firm to avoid detection by the firm. The practice is known as “selling away.”

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The association of state securities regulators known as NASAA has released its top 10 investment traps. NASAA finds that scam artists are peddling various get-rich-quick schemes to take advantage of the economic uncertainty. According to NASAA, investments that investors should be particularly wary of include distressed real estate schemes, energy investments, gold and precious metal investments, promissory notes, and securitized life settlement contracts. Tactics used to peddle such investments often involve affinity fraud, bogus or exaggerated credentials, mirror trading, private placements, and securities and investment advice offered by unlicensed agents.

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So-called peer-to-peer online lending first became possible in the United States five years ago, but if you are considering investing money as a lender, it would be wise to wait a couple of years to see how existing lenders fared, according to Ron Lieber’s New York Times article, “The Gamble of Lending Peer to Peer.”

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The Securities Exchange Commission in cooperation with the North American Securities Administrators Association (NASAA) have issued warnings to investors about the risks of peer-to-peer lending via the Web.

In the current economic environment where it is often difficult to obtain a conventional loan from banks, peer-to-peer lending or P2P, has become popular. Peer-to-peer lending allows individuals and small businesses to use an intermediary to obtain loans over the internet from other internet users. This type of social lending, or online loan matchmaking, invites investors to fund these loans based on the promise of a steady above average capital return. P2P intermediary firms, such as Lending Club, tell investors the pool of loans which they are buying into could yield about 12%, but because borrowers could default on their loans, to be expecting more like 9%.

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