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Financial and Investment Fraud

Financial and investment fraud harms both investors and the market at large. Despite numerous federal laws and regulations that prohibit such fraud, it is increasingly common and often goes undetected. For example, a recent study estimated that only about a third of frauds in public companies actually come to light. This is why it is so important that whistleblowers with information on potential financial and investment fraud come forward.

Both the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have whistleblower programs that empower whistleblowers to report fraud and, if successful, receive a financial award. Read more about how these whistleblower programs work here.

Identifying and Reporting Financial Fraud

Financial and Investment fraud can take many different forms. This type of fraud is prohibited by multiple federal statutes and regulations enforced by the SEC and CFTC. In Fiscal Year 2022 alone, the SEC filed 760 enforcement actions and recovered $6.4 billion in penalties and disgorgement on behalf of the investing public. Both the SEC and CFTC investigate a wide range of different securities fraud schemes, including (not limited to):

  • Public Company Disclosure Fraud: The securities laws prohibit fraud relating to disclosures made by public companies. The SEC investigates issuers or their employees who make materially inaccurate disclosures, as well as auditors and their professionals who violate any laws or rules in connection with such disclosures.
  • Market abuses: The securities laws prohibit various abusive trading practices, including insider trading, market manipulation, and cherry-picking. The Commodity Exchange Act likewise prohibits fraud related to the derivative and commodity markets, including futures, options, swaps, and any contract of sale of any commodity in interstate commerce.
  • Foreign Corrupt Practices Act: The SEC and CFTC enforce the Foreign Corrupt Practices Act against public companies and firms in the commodity market that engage in bribery or other prohibited corrupt practices abroad.

Enforcement Priority: Cryptocurrency and Cybersecurity Fraud

Recent years have brought an increased focus on the part of the SEC and CFTC to the enforcement of fraud relating to both cryptocurrency and cybersecurity.

Cryptocurrency scams have been steadily increasing. According to the Federal Trade Commission (“FTC”), more than 46,000 people have reported losing over $1 billion in cryptocurrency scams since 2021. The CFTC reported a 50 percent increase in the number of cryptocurrency-related tips received between 2021 and 2022. Both the SEC and CFTC have made cryptocurrency an enforcement priority. In May 2022, the SEC announced the creation of a new unit, the Crypto Assets and Cyber Unit, and in 2022 alone brought numerous charges against cryptocurrency exchanges, lenders, and individuals for fraudulent activity. In addition, the new Crypto Assets and Cyber Unit has been focused on bringing enforcement actions against companies that fail to comply with core cybersecurity obligations, including maintaining sufficient policies and procedures to protect investors from identity theft and other invasions of data privacy.

As the SEC and CFTC continue to accelerate their enforcement of cryptocurrency and cybersecurity fraud, whistleblowers will be vital in helping regulators identify and prosecute fraud schemes.

Contact Us

If you think you may have information relating to financial and investment fraud, fill out our contact form or call us at (212) 376-5666 for a free evaluation of your potential case. We represent our whistleblower clients on a contingent fee basis, meaning that an attorney’s fee is paid only if your case is successful.