The stock market is a fertile breeding ground for fraud. The massive
increase of technology over the past few decades have now made it
absolutely simple for a single crook to reach tens of thousands of
potential victims just by pushing the "send" key.
If you are reading this on a computer, you have probably been a
recipient of email "stock tips." This is a scam where someone widely
publishes information that a certain stock is going to rapidly
increase in value. If thousands of people suddenly want to buy the
stock, it does increase in value -- but only momentarily. The crook
then sells off his own block of stock when it is artificially
inflated, and all the late buyers share the loss to cover his gain.
Civil securities fraud (also known as investment fraud) is a form of
theft by deception, and is considered a white collar crime. It costs
Americans an estimated $40 billion a year, although nobody knows the
real amount because some victims never report the crime.
As one of the most difficult crimes to uncover (investigating and
proving the crime can be time consuming and expensive), your best
bet is to avoid becoming a victim in the first place. Sadly, that
can't always be accomplished. Enron and WorldCom are examples that
prove that even the largest corporate entities are susceptible to
insider frauds. Most of the victims were people over the age of 50;
those who were relying on their investments the most.
The governing body that oversees the business of Securities is the
Securities and Exchange Commission. If you believe that you have
been a victim of fraud, that is who you want to contact:
enforcement@sec.gov.