If you are reading this blog, you might be wondering if you’re the victim of an investment fraud or scheme. More and more, fraudsters are coming up with new scams to extract money from helpless victims. These victims come from all walks of life. In our offices we see investment fraud victims ranging from school teachers, customer service reps, athletes, engineers, doctors, and even  sophisticated lawyers who have been scammed. No one is immune from securities fraud. In fact, one of the most wide reaching frauds involving the famed Wall Street securities guru Bernie Madoff prayed mostly on wealthy and successful business people. So, if you feel you have been scammed, don’t blame yourself. Anyone can fall prey to a crafty securities fraudster. 

There are some typical types of securities scams to look out for. The Securities and Exchange Commission has highlighted them through  investor education posts.  Some of the more common types are:

Affinity Fraud

In affinity fraud, a fraudster targets  members of an identifiable group, such as members of a religious organization, club or people having the same ethnic background. The fraudster often is – or pretends to be –  a member of that group. In order to capture investors, they often use the group’s leaders to get others to invest in the scheme, convincing them that the investment is legitimate and profitable. These community leaders are often also the victims of the scam they promoted.

Affinity fraud scams, such as religious scams, work because they exploit the trust and friendship of the group’s members. Also, sometimes they do not come to the attention of law enforcement because of the close and private structure of many social or religious groups. Also, due to those relationships, many securities fraud victims try to work things out privately within the group instead of getting authorities involved or suing the wrongdoer. 

Affinity scams commonly  involve “Ponzi” or pyramid schemes whereby new money from new investors is used to pay out earlier investors, thus making the investment seem legitimate within the group.

Advance Fee Fraud

In an advance fee fraud, the perpetrator will ask investors to pay an up front fee – in advance of receiving any proceeds such as money or stock– before receiving payment from the upcoming  deal. The payment in advance is often characterized as a fee, commission, or  an  expense that will be repaid to the investor at a later time. Sometimes an  advance fee scam will  target an investor who’s already bought and suffered a loss in a security by offering  to sell that security for the investor if an “advance fee” is paid upfront. In this type of scam, fraudsters may tell the investor  to wire the advance fees to an escrow agent or a lawyer attempting to make this scheme appear legitimate. Another tactic is the use of official-sounding websites and e-mail addresses. 

Some types  of advance fee frauds can involve the offering of products, investments, lottery winnings, or “found money” which belongs to the victim. 

Binary Options Fraud

Today, most binary options are traded through Internet-based platforms which aren’t complying with applicable U.S. regulatory. The SEC has warned investors to  be wary of fraudulent schemes involving binary options and binary options trading platforms. 

What is a Binary Option?

A binary option is simply an options contract where the payout typically depends whether an asset’s price will either rise above or will fall below a certain specified amount.  Once the binary option is bought, there are no further actions on the part of the because binary options will automatically exercise.  These differ from other types of options, because a  binary option doesn’t  give the holder the right to buy or sell the specified asset.  When it expires, the binary option holder will receive either a pre-set cash payment or nothing at all. Because of their all-or-nothing payout structure, binary options are also called  “all-or-nothing options” or “fixed-return options.” 

In the typical situation, a binary options website will ask that the customer deposit money into their account to purchase  the binary options contracts.  For example, a customer may be asked to pay $50 for a binary option contract promising a 50% return if the stock price of ABC company is above $5 per share when the option expires. 

Fraudsters representing  binary options websites sometimes use fictitious names or fake credentials, qualifications, and experience.  They may pretend that they are in the U.S. when they are not.  Another tactic is the use of supposedly “unbiased” sources that review or rank binary options websites—when these sources may have been paid to tout or to criticize particular websites.  In fact, fraudsters may even “warn” you that the binary options website you are using is a scam, gaining your trust while  getting  you to deposit money in a different fraudulent website of theirs. 

Internet and Social Media Fraud

Many of the investment scams showing up on social media are age old tricks that well preceded the Internet. Investment fraudsters engaging in  “pump and dump” schemes, “guaranteed returns,” frauds, “High Yield Investment” scams  and affinity fraud now use the Internet as a new tool to promote their lies.

Today, many investors rely on the Internet and social media to assist in their investment decisions. While online tools are helpful and can provide  many benefits, these same tools can be used by criminals. Fraudsters use the Internet to reach a wide audience without investing much time or energy. It’s very simple  for investment scammers  to create a platform or email message which looks real and credible. If an online investment promotion seems interesting to you, take your time to research the new “opportunity” before you give up any of your contact information. 

Social media

Social media platforms like  Facebook, YouTube, Twitter, reddit and LinkedIn, are often relied upon by investors in making investment decisions. These social platforms are used by investors who are researching particular stocks or investments, seeking background information on a broker,  looking for guidance on an investment strategy, staying current  on investment news,  or discussing the markets or their investments with others. Fraudsters can use social media as a tool to  make them look legitimate.

Online bulletin boards and chat rooms

Online bulletin boards, stock specific chat rooms and other social media sites are now commonly used by investors as a way to discuss securities or events and to  share information. While some of the information exchanged may be true,  a lot of it may be bogus – or even a scam. Fraudsters have been known to use online discussion platforms to pump up a company’s stock price or to pretend to disclose secret  “inside” information about upcoming events or announcements about a company. In truth, you never really know who is behind such messages because many such sites will allow users to hide their identities. Posters claiming to be “unbiased” could  actually be  company insiders, or  shareholders who are betting on a stock to go up or down.  The nature of these sites allows just one person to create the illusion of  many people having interest in a stock by posting many such messages or comments using  various names.


“Spam” which will often appear in your junk e-mail – can often be used in connection with fake investment schemes or to spread false information to affect stock buying activity or price. With the ease of bulk e-mail programs, fraudsters can use spam email to send what appears to be “personalized” messages to millions of people very cheaply. More inexpensive than the cost of cold calling or using old fashioned snail mail. Many scammers use spam to reach potential victims.



Not everyone who loses money in the stock market or in an investment has a claim. However, under certain circumstances where misconduct or violations of securities laws and rules have occurred, investors may have the right to seek legal recourse. If you or a loved one have suffered investment losses as a result of an online options investment or any other type of investment fraud or broker negligence, contact the offices of Investment Fraud lawyer Melanie Cherdack for a free consultation. Because she has been in the trenches as a former Wall Street attorney, Melanie Cherdack and her team of experienced attorneys have seen just about every type of investment fraud or investment scam. While almost every investment carries a degree of uncertainty and risk, you may have been unnecessarily exposed to such risk. Former Wall Street securities attorney Melanie S. Cherdack and her team of lawyers represent individual and institutional investors who are unwitting victims of investment fraud and broker negligence. She heads up a group of attorneys who represent investors across the United States. Contact us by filling out our online contact form, or calling 844-635-1609 or 305-349-2336.