FINRA Issues Alert Regarding Investment Recovery Scams

Sept. 26, 2016
Craig Wendland

Recently, the Financial Industry Regulatory Authority, Inc., (FINRA) posted a warning to investors regarding fraudulent advertisements for recovery scams, which offer to recoup investment losses for a single, upfront fee:

"While it's very enticing to hear you might be able to recover money lost from a previous investment or investment scam, some investors end up losing even more money to unregistered con artists who run so-called ‘recovery scams,'" said Gerri Walsh, FINRA's Senior Vice President of Investor Education. "Fraudsters can paint a very credible story to persuade you to send money in advance to get back at least some of what you originally lost. But the sad fact is that the money you send may itself be lost for good." 

While recovery scams have been around for a long time, their advance into investment recoveries is indicative of a sophisticated criminal evolution and the potential for larger losses.

Generally, recovery scams use a variety of lies to add credibility to their pitch. For example, some claim to represent companies or government agencies; some say they're holding the money for you; and others offer to file “necessary” paperwork on your behalf or get your name at the top of a list for victim reimbursement.  FINRA noted that recent scams involving investment recoveries often included similar tactics, such as:

  • Urgent correspondence and high-pressure calls are received from official-sounding organizations that claim to work closely with the U.S. government.
  • Callers may impersonate registered securities professionals and brokerage firms. In some instances, these con artists state that they are registered with FINRA and can be verified using FINRA BrokerCheck, a service that allows investors to check registration and other information about securities firms and investment professionals. Beware. These individuals may go so far as to falsely use the name of a real person or firm that is registered with FINRA.  
  • Once contact is made with the investor and the investor expresses interest, a series of official-looking documents are sent to assure the investor that money is waiting in an account and can be recovered for a fee.   

Notably, FINRA and the FTC both warn that lists of previous victims are often kept, sold or recirculated amongst criminals, so it is common for scammers to "go back to the well" to try to take more money from a previous victim.

Read FINRA’s official Alert for more information on how to spot and avoid fraudulent "recovery" scams.

If you have questions or need assistance with your legal matter in California or nationwide, our experienced FINRA attorney in San Diego can assist you.  Please contact us, or set up an appointment at our San Diego offices.

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