Securities Fraud Lawyers Blog

Artificial Intelligence Expanding Impact on Investing

Published on: February 6, 2023 | by Savage Villoch Law, PLLC

Artificial Intelligence (AI), as it develops capabilities far beyond ‘program trading’ has the potential to greatly impact the world of investing in the stock market. In the past decade, technology has advanced greatly, leading to its use in a wide range of industries, including finance. While there is still some uncertainty about how AI will impact the stock market, it is generally believed that it will bring about significant changes in the near future.

One of the biggest benefits of AI in investing is the speed and accuracy of decision-making. With the ability to process large amounts of data quickly, AI algorithms can analyze market trends and identify profitable investments much faster than human traders. In addition, AI algorithms can be programmed to avoid psychological biases that can negatively impact human traders’ decision-making. This could result in more rational and profitable investment decisions.

Another potential benefit of AI in investing is the ability to identify patterns in data that humans might miss. AI algorithms can analyze vast amounts of data, including financial data, news articles, and social media, to gain a comprehensive understanding of a company and its potential for growth. This can provide investors with a more accurate picture of a company’s financial health and future prospects, allowing them to make better investment decisions.

The Most Common Investment Fraud Tactics – Part Two

Published on: November 7, 2022 | by Savage Villoch Law, PLLC

One of the best ways an investor can protect the value of their investments is by equipping themselves with knowledge about common tactics scammers use to defraud investors. The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) have identified five of the most common techniques used in committing investment fraud. [1]

More information on the first three of these tactics – the “phantom riches” tactic, the “social consensus” tactic, and the “credibility” tactic – and how investors can avoid them can be found in Part One of this two-part series.

Here, we will consider the remaining two most common investment fraud tactics identified by FINRA and the SEC: the “reciprocity” tactic and the “scarcity” tactic.

The Most Common Investment Fraud Tactics – Part One

Published on: October 31, 2022 | by Savage Villoch Law, PLLC

When it comes to protecting investments, one of the most useful strategies is awareness. Investors can empower themselves by knowing the basics of the most commonly used investment fraud tactics.

Per the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC), three of the most common investment fraud tactics employed by scammers in the United States are known as the “phantom riches” tactic, the “source credibility” tactic, and the “social consensus” tactic. [1]

Each tactic essentially functions by allowing the fraudster to build a false narrative surrounding their supposed investment opportunity, thereby garnering interest and ultimately investment dollars from unsuspecting investor victims.

Three Simple Methods for Protecting Your Investments

Published on: October 24, 2022 | by Savage Villoch Law, PLLC

As the familiar adage goes, the higher the risk, the higher the reward. Of course, when it comes to investment strategies, risk is often one characteristic around which you can make informed decisions to mitigate or embrace, depending on your level of risk tolerance.

Yet there is one investment risk – the risk of fraud – which at first glance seems uniquely difficult to mitigate. Fortunately, there are indeed several steps investors can take to protect their hard earned investment dollars from fraud.

In the United States, the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”) each offer investor resources for reducing the risk of investment fraud.

Under False Persona, Man Defrauds Investors of Millions

Published on: October 17, 2022 | by Savage Villoch Law, PLLC

In a stark reminder to thoroughly confirm your stockbroker’s background, the Securities and Exchange Commission (“SEC”) recently charged a California man with defrauding investors of millions of dollars by using a patently false persona. [1]

The SEC’s complaint charged Justin Costello with violations of the anti-fraud provisions of several federal securities laws as a result of his role in this massive fraudulent scheme. [2]

While the SEC’s complaint alleges a broad web of fraudulent investment schemes, Costello mainly operated through deceit about his background, his qualifications, and the value of the companies he owned and operated. [2] Throughout the span of his fraudulent schemes, Costello was never registered with the SEC as a broker-dealer nor investment adviser. [2]

Has Your Stockbroker Defrauded You?

Published on: October 10, 2022 | by Savage Villoch Law, PLLC

Even a well-trusted investment advisor can take advantage of their client relationships, as illustrated by a recent lawsuit brought by the United States Securities and Exchange Commission (“SEC”).

Per the SEC’s September 29, 2022 complaint, Bradley Goodbred, a registered investment adviser based in Illinois, misappropriated a total of $1,295,000 from a 97-year-old client between 2012 and 2021. [1] While the defendant, Goodbred, returned a portion of this money, his client still lost more than half a million dollars as a result of his fraudulent actions. [2]

According to the SEC’s complaint, Goodbred became the client’s investment adviser sometime before 2006, when the client and her husband were searching for a trusted, long-term financial adviser to help guide financial decisions in the event that the client’s husband passed away. [1]

Is Your Stockbroker Keeping Your Personal Data Safe?

Published on: September 26, 2022 | by Savage Villoch Law, PLLC

While it may be difficult to verify first-hand how secure your stockbroker keeps your personal information, a recent order from the Securities and Exchange Commission (SEC) shows that even the largest stockbrokers are prone to customer data breaches.

On September 20, 2022, the SEC fined financial services giant Morgan Stanley Smith Barney (“MSSB”) $35 million for failing to adequately protect its customer’s records and personal identifying information (“PII”). [1] The fine was entered via a settlement between the SEC and MSSB, through which MSSB has agreed to pay a civil penalty for the SEC’s charges without admitting to nor denying the violations. [2]

MSSB is a subsidiary of Morgan Stanley and focuses on wealth management services for clients ranging from individuals to large corporations. [3] More specifically, MSSB is the broker-dealer designation for the group more commonly known as Morgan Stanley Wealth Management. [3] During the second quarter of 2022, Morgan Stanley Wealth Management recorded $5.7 billion in net revenues. [4]

A Look Into the Future of Cryptocurrency Regulation

Published on: September 20, 2022 | by Savage Villoch Law, PLLC

Signaling the potential future of cryptocurrency regulation in the United States, Gary Gensler, the Chairman for the Securities and Exchange Commission (SEC), shared his perspective that the majority of crypto tokens are indeed securities under U.S. law while presenting at the SEC Speaks event in early September. [1]

Along with the sharing his viewpoint that the majority of crypto tokens and cryptocurrency intermediaries are subject to federal securities laws and regulations, Gensler also shared a quote from the first SEC Chairman, Joseph Kennedy: “No honest business need fear the SEC.” [1] Gensler’s repeated reference to this quote supported his overarching message that regulatory oversight of crypto tokens and intermediaries should be viewed as a positive for the market rather than a negative.

In first speaking on crypto tokens themselves, Gensler noted that the purchase and sale of these tokens are subject to federal securities laws so long as the tokens meet the statutory definition of a security. Gensler cited Congressional purpose and history as well as the Supreme Court’s “Howey Test” in support of his view. [1]

Organizer of $77 Million COVID-19 and Allergy Testing Scheme Convicted on Securities Fraud Charges

Published on: September 12, 2022 | by Savage Villoch Law, PLLC

On September 2^nd, 2022, the United States Department of Justice (DOJ) announced that Mark Schena, the president of a Silicon-Valley medical technology company, was convicted by federal jury for his role in a $77 million fraudulent Covid-19 and allergy testing scheme. [1]

The jury convicted Schena of three counts of securities fraud, two counts of payment of kickbacks, one count of conspiracy to pay kickbacks, two counts of health care fraud, and one count of conspiracy to commit health care fraud and conspiracy to commit wire fraud. [1] While he won’t be sentenced until early 2023, Schena faces a maximum of 20 years for each count of securities fraud alone. [1]

While this case draws quite a few parallels to the early-2022 trial and eventual conviction of Elizabeth Holmes, the founder of Theranos, it has thus far drawn far less media attention. [2] Still, Schena’s conviction provides another important glimpse into the dangers investors may face when dealing with alleged cutting edge or “revolutionary” technologies.

New SEC Investor Alert Highlights Dangers of Social Media Investment Fraudsters

Published on: September 6, 2022 | by Savage Villoch Law, PLLC

In response to a recent proliferation of fraudulent investment schemes perpetrated over social media platforms, the Securities and Exchange Commission (SEC) released an Investor Alert covering “Social Media and Investment Fraud” this week. [1]

The Investor Alert, released by the SEC’s Office of Investor Education and Advocacy, highlights the unique dangers investors face when evaluating investment prospects and making investment decisions via social media platforms or over the internet. In particular, the alert warns investors that investment information portrayed on social media may be “inaccurate, incomplete, or misleading.” [1]

Furthermore, the alert cautions that the broad-reaching and low-cost nature of social media can create “false impression of consensus or legitimacy” of investment prospects, creating the illusion that far more people are making the investment than truly are. [1]