5 Signs You May Be a Victim of Corporate Securities Fraud

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What happens when a publicly-traded company misrepresents its value in order to woo investors?

It’s called corporate securities fraud, and it’s far more common than you may think. According to a well-cited market study conducted by the New York University School of Law, the annual cost of U.S. corporate violations of securities law runs between $181-$364 Billion — and it is American investors who suffer most.

When corporations deceive the public into thinking their company is more successful or more prosperous than it is in reality, both stockbrokers and shareholders can take huge financial hits.

Unfortunately, the amount of securities law violations committed by corporations has only increased each year — and at a record pace. Corporations that fail to provide accurate and complete financial reports need to be held accountable for the damages they cause to investors.

What Is Securities Fraud?

Securities fraud occurs when a corporation inflates its value by manipulating its stocks, flooding the market with flattering misinformation, or committing other securities law violations. These actions can ultimately lead to shareholders suffering significant economic injury.

Corporations can commit securities fraud in a number of ways, including, but not limited to:

  • Fraudulent stock manipulation
  • False reporting of company valuation, including quarterly and annual earnings
  • Omission of crucial company-value-related information
  • Failure to disclose potentially damaging information
  • Untrue or misleading public statements made to inflate company stock prices
  • Creation of false or non-existent sales and/or business transactions
  • Prematurely announcing partnerships with and/or acquisitions of other companies before such deals are actually made
  • Violations of federal or state securities law

In some cases, the economic loss suffered to investors can amount to hundreds of thousands of dollars.

What Is Securities Class-Action?

A securities class-action is a lawsuit filed on behalf of a group of people who allege they have suffered economic loss as a result of corporate securities fraud.

In a securities class-action case, the investors who file a lawsuit against a corporation are known as the “Lead Plaintiffs.” The law firm (or firms) that represent the lead plaintiffs in a securities class-action case will typically identify a “Class Period,” which is the period of time during which fraud or securities laws violations occurred.

For example, if an investor purchased company stock during the class-period timeframe — when the fraud is alleged to have occurred — and suffered economic loss as a result, they may be eligible to join a securities class-action against that company.

According to data collected by Stanford Law School and Cornerstone Research, 428 securities class-actions were filed in 2019 alone — the highest amount on record. The year 2019 also marked the third straight year in which more than 400 such cases were filed.

As a result, Stanford’s research shows that market-capitalization losses in 2019 totaled more than $1 Trillion for the second consecutive year.

5 Signs You May Be a Victim of Securities Fraud

While none of the signs below guarantees that you are a victim of federal or state securities fraud, there are common signs that may indicate securities fraud has occurred.

1. Significant Economic Loss

For shareholders who have seen their investment’s value sharply decline, it is possible the drop in per-share price may have been a market response to a securities law violation. Companies often see sharp declines when investors, expert economists, and watchdog groups have identified potential instances of fraud.

2. Stock Volatility

When a company’s per-share price rises sharply and drops quickly, it may be a reflection of the company’s overall stability and trustworthiness. Similarly, if a stock has a relatively large price range over a short period of time, it may indicate a market response to potential fraud.

3. Unsubstantiated Statements

In some cases, a company’s figurehead, CEO, president, or representative may make a false or exaggerated public statement or claim to have a product, service, or way of doing business that will “change everything.”

An example of this could be a company claiming to have developed a cure for cancer. In response to the statement, the company’s value may soar as new investors flock to buy up shares, only to plummet when the statement is determined to be false.

4. Investment Seems Too Good to Be True

If an investment seems “too good to be true” – such as buying certain shares that will immediately result in high-profit returns, for example – it likely is. In the stock market, it is exceptionally rare for investments to skyrocket overnight. Claims that a certain stock is a sure bet and result in immediate returns may be exaggerated or unfounded.

5. History of Securities Class-Action

Some companies, despite numerous fines from the U.S. Securities Exchange Commission (SEC) and one or several securities class-actions, continue to commit securities violations. If you are in an investor in a company with such a track record, you may be at higher risk of encountering such fraud.

What Should You Do If You Are a Victim of Securities Fraud?

As securities law violations continue to rise at unprecedented rates year after year, it grows increasingly important for investors to be cautious, recognize when a violation has occurred, and take action immediately.

Various corporations have allegedly manipulated their stocks or committed other securities law violations, which caused shareholders to suffer significant financial damages.

At Sokolove Law, our team is currently investigating cases involving the companies below:

  • Anadarko Petroleum Corp. (APC)
  • Funko, Inc. (FNKO)
  • Inovio Pharmaceuticals (INO)
  • JELD-WEN Holding, Inc. (JELD)
  • Spirit AeroSystems Holdings, Inc. (SPR)
  • Tufin Software (TUFN)
  • Tupperware Brands Corp. (TUP)

A securities class-action lawyer may be able to help investors of a particular stock or security recover their economic losses and hold the company at fault accountable.

Sokolove Law, a national law firm, offers a free, no-obligation legal case review for those who believe they have suffered damages due to a corporation’s violation of U.S. securities law.

Call Sokolove Law today at (800) 598-5203 to learn more about how we might be able to help you recover your losses.

Author:Sokolove Law

The Sokolove Law Content Team consists of writers and editors who work alongside the firm’s attorneys and case managers. The team strives to present the most accurate and relevant information for those who need legal help.

Last modified: March 26, 2020

View 8 Sources
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  2. New York University School of Law. “How Pervasive Is Corporate Fraud?” Dyck, Alexander, Adair Morse and Luigi Zingales. Retrieved from https://www.law.nyu.edu/sites/default/files/upload_documents/Adair%20Morse%20How%20Pervasive%20is%20Corporate%20Fraud.pdf. Accessed March 24, 2020.

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  7. U.S. Securities and Exchange Commision. “Guide to Identifying and Avoiding Securities Fraud.” Retrieved from https://www.sec.gov/reportspubs/investor-publications/investorpubsidentavoidfraudhtm.html. Accessed March 24, 2020.

  8. William & Mary Law Review. “The Cost of Securities Fraud.” Retrieved from https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=3488&context=wmlr. Accessed March 24, 2020.