FINRA: Beware of Follow-Up Scams

The Financial Industry Regulatory Authority (“FINRA”) recently warned investors to be wary of companies that “approach victims of investment fraud claiming that, for a fee, they can help them recover the sums invested or the losses incurred on unlawfully operating trading platforms.”

This type of sales pitch may be indicative of a fraudulent scheme known as a “recovery room.” While some state and federal agencies help investors who have lost their money, there is no required fee. Additionally, guarantees are neither made, nor special preference given, to investors who file a complaint. FINRA particularly warns investors who live outside the United States, as their geographic location can make it even more difficult locate the person or group responsible for scamming those investors.  

According to FINRA, scam artists often trade lists of previous victims amongst themselves. Gerri Walsh, FINRA’s Senior Vice President of Investor Education, stated that an investor’s losses are often compounded when they are at their most vulnerable. “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.”

FINRA advises that investors can help themselves by being aware of the warning signs of a recovery room fraud. “In most cases victims are contacted by someone impersonating a government official or pretending to be affiliated with FINRA or designated by them to perform investigations or other services.”  To increase their credibility, the scam artists will also utilize “urgent correspondence and high-pressure calls.”  Finally, once the victim shows interest, the scam artist will send fake documents meant to assure the investor that the money they lost is sitting in an account, waiting to be recovered, for a fee.

For more information, see FINRA’s Investor Alert.

About Faruqi & Faruqi LLP

Faruqi & Faruqi focuses on complex civil litigation, including securities, antitrust, wage and hour, and consumer class actions as well as shareholder derivative and merger and transactional litigation.  The firm is headquartered in New York, and maintains offices in California, Delaware and Pennsylvania.

Since its founding in 1995, Faruqi & Faruqi has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.

About Christine Goodrich

Christine E. Goodrich is a Senior Associate with Faruqi & Faruqi, LLP’s New York City office.  Ms. Goodrich’s practice is focused in securities arbitration, litigation and regulation.

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