Fraud – Will Hedge Funds Produce The Following Really Big One?

July 26, 2012 · Posted in Education · Comment 

Making an investment in hedge funds is also great decision but you want to ask your investment fraud attorney .

For thousands of years investment advisors have been asking financiers to give them cash so they could invest it for them. Even after Charles Ponzi in the 1920′s, backers have continued to give investment counsels cash to invest. The retirement fund industry has been the biggest vehicle, but is very regulated and has produced few frauds. Uncontrolled investment schemes, such as PONZI schemes and its brother, ponzi operations, have been the most fertile kinds of investment fund frauds. Hedge funds could be the next significant auto. Hedge funds have gained in recognition to a stupefying investment amount of over $2 trillion, according to the SEC. Over 2,400 investment counsellors have registered 11,500 hedge funds with the SEC this year.

So why would hedge funds produce the next extremely big crime? According to the Association of Authorized Crime Examiners and Financial Accounts Standards Board, the environment for crime includes 3 factors, “incentives/pressures, opportunities, and disposition/rationalization.” The hedge fund chief certainly has the pressure from his backers to supply results. He has also got an uncontrolled environment to work in manufacturing the break. Additionally the high-risk/high reward attitude of the manager makes him likelier to take the danger of scamming his stockholders.

A quick review of the SEC legal proceedings releases in the past year shows increased activity against hedge funds, including: altering audited fiscal reports, hiding losses, creating a fictitious auditor, insider trading, market timing (funds), misappropriation, misrepresentation to stockholders, non-disclosure to the SEC, and stock manipulation. These crimes were not limited to small or offshore funds, but included funds with hundreds of millions of bucks operating throughout the US. Are these all the frauds occurring? No, but these are simply the ones that the SEC has litigated against. No one knows in this unregulated environment how many frauds are occurring today.

Since hedge funds remain a popular investment vehicle, how can a backer defend against these frauds? Like any investment, the financier must do due diligence before investing in a fund. The financier should review the funds offering materials, investment goals, checked finance reports, background of investment advisors and other documentation provided by the fund. He should confirm the dimensions of the portfolio with the fund’s custodian. He should check the background of the personnel of the investment advisor working on the fund. He should check for regulatory action against the investment advisor and its staff. He should evaluate the ability of the outside auditor. He should decide who prepares the periodic finance statements provided investors and whether there is third-party oversight. He should define if the fund has registered with the SEC. He should check with others in the industry that have knowledge about the fund.

After the investment is made the investor’s required groundwork shouldn't stop. Lots of the documented hedge fund frauds have not started at the beginning of the fund, but after the financiers became comfy. The investment advisors continue being forced to supply results or lose their investors. The investor should continue to review the reports sent to him by the fund. He should confirm the scale of the portfolio with the custodian on a periodic basis. He should watch for changes in auditors and other 3rd parties. He should be alert for any regulator action against the fund or its counsellors. He should not let the early withdrawal penalties stop him from withdrawing at the first sign of difficulty. In most of the documented cases, there's not much left, after discovery of the fraud and the litigation to recover from the conmen and 3rd parties.

The answer's that some hedge funds are defrauding their investors while they aren't closer regulated. With the increasing recognition and size of a few of these uncontrolled funds, one of these may become the next very big fraud. Don't be the financier caught in it!

Mr. Cuthill’s practice is restricted to court-appointed positions in enormous fraud cases. His work has produced the return of millions of bucks of backers ‘ funds.

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Why Should You Avoid Investment Clubs?

July 18, 2012 · Posted in Education · Comment 

The Ponzi fraud was named after Charles Ponzi who made millions early in the twentieth century by captivating financiers in the USA to part with their money on the guarantee of significant returns. He kept the victims coming by paying returns out of new speculators ‘ funds. The biggest Ponzi crime was committed by New York banker Bernie Madhoff who conned his victims out of 40 bill. He was locked up for 150 years in 2009 but this does not help the thousands of speculators who lost their money. One way the clubs must avoid is some investment fraud lawyers .

Ponzi crimes are often dressed up as investment clubs, offering higher than predicted rates of return to a chosen few who are asked to join. It is astonishing that these schemes continue with all the publicity surrounding the frauds that at last become plain. These are classic frauds of course, depending on the persuasive abilities of the fraudster who comes across as a competent and respectable businessman. A Ponzi fraudster will build trust with his victims. He can select a division of the community where he'll easily establish a rapport. The word will get around that there's a genuine scheme that is paying high dividends and plenty will head to invest. The fraudster simply pays out interest to the backers out of the fresh funds that keep on coming in, thus steadily eroding the capital funds that aren't really invested in the slightest.

At last such a project will collapse – it is inevitable. At some point several backers will choose to withdraw their funds, perhaps becoming suspicious. The pot of available funds for paying interest will no longer be available to imply of healthy investment returns. At this time the fraudster will without doubt try to leave to some offshore location where he has salted away a huge proportion of his takings.

The difficulty is that the full idea of the Ponzi crime is based upon a myth arising after the second World War. Then a little band of charitable speculators banded together to help reconstruct Europe after the devastation. Hugh sums of cash were invested and the returns turned out to be enormous. The funding opportunity was limited to a chosen few and the concept of being invited to an alternative investment market was born. The idea still continues and is exploited by the unscrupulous villains. Nevertheless who knows, there may still be an element of truth in an investment club for the mega rich?

Mark Jenner is a forensic accountant specialising in crime issues. He assists firms and other setups to stop and notice fraud and to recover thieved assets. He is a Fellow of the Institute of Licensed Accountants, a Licensed Crime Examiner and holds a Masters in Fraud Management.

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The Risks of Investing In A Unsteady Market

July 12, 2012 · Posted in Education · Comment 

For those of us who hope to attain monetary security and autonomy in future times there are plenty of elements in our finance plan that will allow us to sometime reach this difficult-to-realize goal. These activities or principals of cash managing often include starting up a business, living below one’s means, and having a large nest egg. Naturally, if one wants to expedite the wealth building process, he must also consider investing in publicly traded stocks, bonds, or stocks.

The market, which has been around for 1 or 2 decades, has been the center of American commerce. It's been an indicator of the American quality of life and a measure of American productiveness in comparison to the rest of the planet.

For ages folks have been drawn to the market’s potential money-making ability. There have been countless stories of people that have taken tiny amounts of money and turned them into riches by investing into the stock market. The planet's most money-savvy businessmen and women have turned the art of predicting the market into a science, persuading a lot of them to invest full time. But like with any business, there are negative aspects and dangers, of which we have to be aware.

Horrific tales of folks that have been swindled out of their cash by folks who make fake promises are getting increasingly abundant in American society. These shifty, wily snakes slither their way into American homes, targeting the inexpert (and in a number of cases the experienced) investor. They eat the pull of the American dream, where financial liberty allows the individual to become whoever he would like to be.

Investment fraud attorneys doesn't discriminate against any individual. Even for the most experienced, money-savvy, and prudent individual, a clever enough crook can wiggle his way into your bank account. That's why it is important to grasp the hazards of investing, before closing a deal. With the present housing crisis and liquidity crunch, the very liquid market has squeezed the world of leveraged investing. Particularly, auction-rate securities sector saw an increase of sad financiers. Underwriters like UBS and Goldman Sachs haven’t found the right number or consumers for the market, leaving folks stuck with investments they only meant to keep for a short time.

It is critical to grasp, though, that the potential of being swindled is real. And if you think that you have been a victim of crime, there are some things you can do.

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