Tag Archives: Financial Fraud

Be aware of financial fraud in online trading and your financial firm’s policies on claims for reimbursement in fraud cases

Wall Street Journal: Check Brokerage Statements and Online Accounts for Signs of Fraud

Wall Street Journal: Check Brokerage Statements and Online Accounts for Signs of Fraud

A recent Wall Street Journal article suggests, “Most Firms Will Reimburse Customers, But There Isn’t a Blanket Guarantee.[i]” The problem remains that too often, the individual investor does not detect financial fraud and the financial firms may not detect and notify customers of problems. In order to protect your financial accounts and investments, it is important to learn how to properly read brokerage statements and online accounts. The WSJ article also highlights cybertheft risks inherent in any online financial activity, and how customers can minimize the chances they will become a fraud victim.

Cyberthieves can hack into your account and steal your money.

One such cyberthief, a Russian living in New York, received a 30-month sentence to prison for hacking into individual’s brokerage accounts and making trades without the knowledge of the account holders. The compromised accounts included Scottrade, E*Trade Financial, Fidelity Investments and Charles Schwab, to name a few. “He and his co-conspirators made trades in accounts to move the prices of holdings in accounts they had opened using stolen identities, causing about $1 million in losses, according to the Federal Bureau of Investigation.[ii]

The large and well-known financial firms offer safeguards to their customers in the event their accounts are compromised. Scottrade’s “Online Security Guarantee” offers some piece of mind to investors as well as tips and precautions so that customers maintain safe online habits.

Here are some precautions Scottrade suggests to minimize the risk of fraudulent activity in your account:

  • “Use safe online habits;
  • Install security software;
  • Create a safe and hard-to-guess password;
  • Keep your operating system and browser updated;
  • Review your financial history regularly;
  • Protect your account number and password.”

As for the guarantee and reimbursement offered by Scottrade, just to cite as an example of what is likely a similar standard for other competitive trading firms, the Online Security Guarantee (linked above), states, “You agree to cooperate with us in any investigation and to take additional steps and corrective measures to protect against fraudulent activity. We may ask you to give us access to your computer, sign an affidavit, assign certain rights to Scottrade or sign a release from us as a condition of reimbursement.” These conditions, albeit common, may give an individual investor some concern.

At Michael V. Favia & Associates, we can help individual and organizational investors going through the process of seeking reimbursement from financial firms after an incident of fraud or a compromised account. The events giving rise to theft could, in some cases, involve negligence among the investor, the financial firm, and others. The reimbursement process certainly does not need to adversarial, and sometimes being represented by counsel, we have found, can help move things along.

If you or a friend suspects financial fraud, please feel free to contact our firm for more information. Michael V. Favia & Associates represent clients with fraud cases. With offices conveniently located in the Chicago Loop, Northwest side and suburban meeting locations, you can schedule a meeting with an attorney at your convenience. For more about Michael V. Favia & Associates, please visit the firm’s website and feel free to “Like” the firm on Facebook and “Follow” the firm on Twitter.

[i] Wall Street Journal, Check Brokerage Statements and Online Accounts for Signs of Fraud. By Priya Anand, Jul. 25, 2014.

[ii] See WSJ article (FNi)


Chicago investment fund manager Neal V. Goyal charged with fraud by SEC and U.S. Attorneys

It is very important to research and conduct due diligence before investing money with fund managers who look, walk and talk the part but who might be a wolf in sheep’s clothing.

It is very important to research and conduct due diligence before investing money with fund managers who look, walk and talk the part but who might be a wolf in sheep’s clothing.

The Securities Exchange Commission (“SEC”) charged Chicago investment fund manager, Neal V. Goyal, for the Ponzi scheme in which he used investor monies to purchase himself houses and businesses for him and his wife. SEC fraud charges also named Blue Horizon Asset Management and Caldera Advisors, Goyal’s firms. The U.S. Attorney’s Office for the Northern District of Illinois is also prosecuting Goyal. In a common course of action the judge in a federal district court ordered Goyal and his business assets frozen pending investigation and prosecution of criminal charges.

The SEC complaint states that at least 35 people invested in Goyal’s funds. He told investors their money was invested in equities and were “significantly outperformed the market.” The complaint stated that Goyal “never invested the vast majority of the money he raised from investors, and the limited trading that Goyal did perform was unsuccessful and resulted in significant losses.” You would imagine the clients would have been alarmed at the losses but they never knew because Goyal sent them false statements that made it look like the investors were making money. In a “Ponzi-scheme fashion, by using later investors’ money to meet the distribution requests of prior investors,” Goyal was able to keep clients happy while skimming the cash flow to fund his lavish lifestyle, to pay expenses and support personal businesses including, “a bar and two children’s clothing boutiques that his wife operates in Chicago.”

Many of the people who engage in fraud schemes gain the trust of respected members of the communities where they live and work. Since they spend money like successful fund managers, most people do not assume any wrongdoing or fraud until there are signs that money is missing. Building trust and friendship with investors also helps insulate the schemers from suspicion.

“From the beginning of his scheme, Goyal lied to investors and created fake account statements portraying positive trading returns in order to gain their trust and attract additional investments,” said David Glockner, director of the SEC’s Chicago Regional Office.  “Goyal’s limited trading was unsuccessful, and he stole the vast majority of the money he raised.” Read more in the SEC Press Release dated May 29, 2014.

The SEC’s complaint against Goyal and the two advising companies he owned and controlled, charges them with violations of anti-fraud provisions of the Securities Act of 1933, Securities Exchange Act of 1934 and Rule 10b-5, and Investment Advisers Act of 1940. Judge Rebecca R. Pallmeyer ordered a freeze of Goyal’s assets and accounts as a preliminary measure to preserve what assets if any remain that could be recaptured to reimburse defrauded investors.

As there are updates in this case we will report on them to you. Our law firm represents victims of financial fraud and we work to increase awareness of fraudulent activity and highlight the types of crimes. It is very important to research and conduct due diligence before investing money with fund managers who look, walk and talk the part but who might be a wolf in sheep’s clothing.

If you are interested in learning more about Michael V. Favia & Associates, serving Chicago and its suburban communities, please visit the Favia Law Firm website for resources and articles of interest. To contact the firm to speak to a lawyer about a healthcare-related concern, you may dial (773) 631-4580. For more information about the firm’s practice areas, you can also visit the firm’s Facebook and Twitter sites. Please “LIke” and “Follow” respectively to keep in touch!