According to the FBI’s “Financial Crimes Report,” the Great Recession caused a massive increase in securities fraud. This type of fraud has continued up to the present day, and has created a perception of uncertainty in national as well as global markets. This uncertainty has obviously contributed to the continued volatility of today’s financial markets.
From July 22, 2011 until October 3, 2011, the Dow Jones Industrial Average moved from 12,681 to 10,655. During this time period, the FBI observed a consistent rise in securities fraud. This fraud was attributed, in part, to investors seeking new opportunities.
The following are examples of the type of fraudulent trends and schemes:
- Securities market manipulation
- Cyber intrusion
- Commodities fraud
- Ponzi schemes
- Foreign-based reverse merger market manipulation
Investigations into securities and commodities fraud have risen 52% since 2008. Currently, the FBI has approximately 1,800 pending investigations.
It may not be common knowledge that billions of dollars have been lost as a result of these schemes. These losses can be attributed to the following situations:
- Depreciative market value of businesses
- Reduced or nonexistent return on investments
- Legal and investigative costs
The victims of fraudulent crimes vary. In addition to individual investors, fraud victims fall within the following categories:
- Financial institutions
- Public and private companies
- Government entities
- Pension funds
- Retirement funds
While many fraud cases become public knowledge and receive a considerable amount of media coverage, others do not. As a result, it is unclear how many people are actually aware of the broad range and severity of securities fraud. Many would argue that there needs to be serious criminal justice reform to address these white color offenses.
The Bernard L. Madoff case is a prime example of when these cases are made public and tried in the media as well as the courts.
Fraudulent crimes such as the above are signs of professional malpractice. Furthermore, the individuals who perpetrate these crimes have violated their fiduciary responsibility.
Securities fraud has had, and continues to have, a major impact on the national and global economy. The efforts of the FBI to investigate these and other crimes is ongoing. National, as well as international, investigations take time to be resolved, and bringing these perpetrators to justice is often a complex and time-consuming process.