U.S. Experiencing an Upswing in Fraud Perpetrated by Financial Advisers

Bernard (Bernie) Madoff is one of the most recognized criminals in the investment world, having perpetuated the largest Ponzi scheme in U.S. history by fraudulently stealing $65 billion in investor funds.1 Madoff pled guilty to his crimes in 2009 and is serving a 150 prison sentence. Madoff’s fraud victims, numbering 28,056 people in 49 states and 121 countries, recently received a second wave of payments that, along with the first payments made in 2017, amount to a 40 percent minimum baseline recovery.2 It took the victims almost a decade to receive any compensation. Most investment fraud victims lose their entire life savings.

The scary truth is that fraud perpetrated by financial advisers, like Bernie Madoff and his firm, is a growing problem in the United States.

In an October 2018 article in Investment News titled Remember Bernie Madoff? Big time financial fraud is back, reporter Bruce Kelly cites several other recent prominent cases involving financial advisers.3 Kelly reported on the filing of criminal charges by the Department of Justice and the Securities & Exchange Commission (SEC), and the subsequent conviction of Dawn Bennett. She and her retail sports apparel business sold a fraudulent unregistered securities offering that raised more than $20 million from at least 46 investors from December 2014 to July 2017. Another alleged $1.2 billion Ponzi scheme involved the Woodbridge Group of Companies. The SEC claimed last December that the Woodbridge Group took advantage of 8,400 investors, many of them seniors. In the Woodbridge Ponzi scheme, hundreds of insurance agents and brokers, some with ‘checkered careers in the securities industry,’ sold notes supposedly backed up by mortgages. The article also cited the July announcement by the SEC and U.S. Attorney of an investigation of alleged fraud by 1 Global Capital. Through a network of unregistered brokers and financial advisors, that company raised $283 million from investors to make short-term business loans.*

Kelly cites data from the Annual Enforcement Report released in October 2018 by the North American Securities Administrators Association (NASAA).4 Kelly writes, “This year’s enforcement survey reflects a large increase in enforcement actions against unregistered individuals and firms.” He further states that members of the group reported actions in 2017 against 675 unregistered individuals and firms which is an increase of 24 percent over the prior year; and 647 registered individuals and firms, which is a 9 percent increase.

Kelly sounds a warning to both investors and financial advisers writing, “The potential harm to investors is mounting, as is the potential reputational risk to all financial advisers. The financial advice industry should brace itself for what could very well prove to be a turbulent time ahead.”

The Law Offices of Peter C. Rageas has been helping victims of Investment and Securities Fraud recover financial losses for over 20 years. We Are a Full-Service Securities Law Firm handling all aspects of Investment & Securities Fraud.

If you feel that you may have been a victim of securities fraud, please contact our Investment Fraud and Securities Fraud Law Offices serving the Greater Detroit Area and beyond. We offer FREE consultations and are happy to talk to you about your unique case today!


*The 1 Global Capital loan business is a separate, unrelated company from 1st Global Capital Corp, an independent broker-dealer based in Dallas, Texas, according to Bruce Kelly with InvestmentNews.com.


1 U.S. Department of Justice, Office of Public Affairs, Department of Justice Begins Second Distribution of Funds Recovered Through Asset Forfeiture Totaling $1.2 Billion to Compensate Victims of Bernard Madoff Fraud Scheme, 4/12/2018
Link: https://www.justice.gov/opa/pr/department-justice-begins-second-distribution-funds-recovered-through-asset-forfeiture

2 Department of Justice Asset Forfeiture Distribution Program: Madoff Victim Fund
Link: http://www.madoffvictimfund.com/

3 Investment News, Bruce Kelly, Remember Bernie Madoff? Big Time Financial Fraud is Back 10/24/2018
Link: https://www.investmentnews.com/article/20181024/FREE/181029973/remember-bernie-madoff-big-time-financial-fraud-is-back

4 NASAA Releases Annual Enforcement Report, North American Securities Administrators Assocation, October 10, 2018
Link: http://www.nasaa.org/46133/nasaa-releases-annual-enforcement-report-4/