Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws. Offers of risky investment opportunities to unsophisticated investors who are unable to evaluate risk adequately and cannot afford loss of capital is a central problem Securities fraud can also include outright theft from investors stock manipulation, misstatements on a public company's financial reports, and lying to corporate auditors. The term encompasses a wide range of other actions, including insider trading, front running and other illegal acts on the trading floor of a stock or commodity exchange.
Internet fraud
According to enforcement officials of the Securities and Exchange Commission, criminals engage in pump-and-dump schemes, in which false and/or fraudulent information is disseminated via talk shows(spamming), with the purpose of causing a dramatic price increase in thinly traded stocks or stocks of shell companies When the price reaches a certain level, criminals immediately sell off their holdings of those stocks (the "dump"), realizing substantial profits before the stock price falls back to its usual low level. Any buyers of the stock who are unaware of the fraud become victims once the price falls.
Insider trading
There are two types of "insider trading". The first is the trading of a corporation's stock or other security by corporate insiders such as officers, key employees, directors, or holders of more than ten percent of the firm's shares. This is generally legal, but there are certain reporting requirements stock promoters and manipulators These manipulators first purchase large quantities of stock, then artificially inflate the share price through false and misleading positive statements. impending news to persuade the unwitting investor to quickly buy the shares. When buying pressure pushes the share price up, the rise in price entices more people to believe the hype and to buy shares as well. Eventually the manipulators doing the "pumping" end up "dumping" when they sell their holdings
Short selling abuses
Abusive short selling, including certain types of naked short selling, are also considered securities fraud because they can drive down stock prices. In abusive naked short selling, stock is sold without being borrowed and without any intent to borrow.[ The practice of spreading false information about stocks, to drive down their prices, is called
"short and distort persons aged fifty years or older are most often victimized, whether as direct purchasers in securities or indirect purchasers through pension funds.