Accountant's liability stems from legal exposure assumed while performing an audit or corporate accounting services.

An accountant's liability describes the legal liability assumed while performing professional duties. If a bank decides to lend money to a company based on the positive review of a company's financial statements audited by an accountant and then down the line the company cannot pay back its debt, resulting in a loss for the bank, the accountant could be held responsible. It is not uncommon for accountants and auditors to carry professional liability insurance to cover such areas as:
Network and information security offense coverage
Security breach remediation and notification expenses
Investment advisor coverage
Personal fiduciary coverage
Crisis event coverage
Pre-claim assistance Similarly, if investors purchase a company's stock based on the financial statements and the company performs poorly and the stock goes down, the accountant can be held responsible for the losses. An accountant who is negligible in their examination of a company can face legal charges from either the company, investors, or creditors that rely on the accountant's work.

Accountant's Liability

An affinity fraud is an investment scam in which a con artist targets members of an identifiable group based on things such as race, age and religion.

SEC Charges Trader in Houston-Area Investment Scheme Targeting Lebanese and Druze Communities

SEC Shuts Down Ponzi Scheme Targeting Persian-Jewish Community in Los Angeles

SEC Charges Bernard L. Madoff for Multi-Billion Dollar Ponzi Scheme

Utah Task Force: Fraud Victims’ Losses Top $1 Billion New Educational Campaign Warns of Ponzi Schemes and Affinity Fraud

Affinity fraud is a type of investment fraud in which a con artist targets members of an identifiable group based on things such as race, age, religion, etc. Madoff's firm operated a $50 billion Ponzi scheme that among many individuals and financial firms, also targeted many wealthy Jews, Jewish organizations, and charitable groups, including Yeshiva University, Maimonides School, Kehilath Jeshurun Synagogue, Ramaz, the SAR Academy, and Holocaust survivor Elie Wiesel's foundation and his personal savings. Affinity fraud is a type of investment fraud in which a con artist targets members of an identifiable group based on things such as race, age, religion, etc. The most common affinity groups targeted by Ponzi schemers were the elderly or retired; religious groups; and ethnic groups. A study of Ponzi schemes by Marquet International Inc. in 2011 studied 329 major U.S. investment fraud cases discovered in the previous decade of at least $1 million in losses and total reported losses of nearly $50 billion.

Affinity Fraud

An asset substitution problem arises when low-risk assets are replaced with high-risk investments, thereby transferring additional risk to creditors.

An asset substitution problem is when a company's management willingly deceives another by replacing higher quality assets (or projects) with lower quality assets (or projects) after a credit analysis has already been performed. Because equity downside risk is limited, managers of levered firms have incentives to increase the riskiness of the firm's business—so they may substitute safe assets with risky assets, to raise the upside potential of this option.
The incentive to shift risk grows with a company's level of leverage. An asset substitution problem is when a company's management willingly deceives another by replacing higher quality assets (or projects) with lower quality assets (or projects) after a credit analysis has already been performed. For instance, a company could sell a project as low-risk to get favorable terms from creditors, after loan funding, they could use the proceeds for risky endeavors—thus, passing the unforeseen risk to creditors. The key asset substitution problem is risk-shifting, which is when managers make overly risky investment decisions that maximize equity shareholder value at the expense of debtholders’ interests.

Asset Substitution Problem

The Association of Certified Fraud Examiners is an organization that was created to combat fraud and deception in business practices.

2020 Compensation Guide for Anti-Fraud Professionals

Occupational Outlook Handbook: Financial Examiners

The term Association of Certified Fraud Examiners (ACFE) refers to an organization that was created to combat fraud and deception in business practices. The CFE exam tests professionals' knowledge in four different areas including financial transactions and fraud schemes, law, investigation, and fraud prevention and deterrence. With nearly 90,000 members with chapters around the world, the ACFE is the world's largest anti-fraud organization and premier provider of anti-fraud training and education. The association's goals are to do the following:
Provide members with proper certification by administering the CFE exam
Setting industry standards by requiring mandatory recertification and continuing education
Developing and administering a code of ethics and conduct
Acting as a CFE representative
Providing leadership in the industry The Certified Fraud Examiner (CFE) is a professional certification available to fraud examiners who conduct forensic audits and track down financial crimes, among other duties.

Association of Certified Fraud Examiners

Attribution rules look to prevent the creation of business ownership structures that run contrary to Internal Revenue Code regulations.

Attribution rules refer to a set of Internal Revenue Services (IRS) guidelines that have been established to thwart the creation of business ownership structures designed to skirt certain tax laws. A controlled group is any two or more corporations connected through stock ownership involving a parent-subsidiary group, a brother-sister group or a combined group
Internal Revenue Code Section 318 focuses on highly compensated employees, key employees, and disqualified individuals in employee stock ownership plans. For example, if a father owns 51 percent of the business and his son owns 4 percent, the rules deem that the father also owns the son’s 4 percent, but not vice versa. Attribution rules refer to a set of Internal Revenue Services (IRS) guidelines that have been established to thwart the creation of business ownership structures designed to skirt certain tax laws. For example, in theory, spouses who have 100 percent ownership of two separate and unrelated companies would seem to form a controlled group, and thus would have to consider the other’s employees into account when forming retirement plans.

Attribution Rules

Backdating is the practice of marking a document, check, contract or other legally binding agreement, with a date that is prior to what it should be.

Backdating is the practice of marking a document, whether a check, contract, or another legally binding document, with a date that is prior to what it should be. However, there are times when backdating can be acceptable, but the parties involved must agree to it.
Consider the following examples of common backdating scenarios that are _not_ allowed:
On Dec. 10, a tenant, who has missed his Dec. 5 deadline for rent payment to his landlord, backdates a check to Dec. 4 and submits the check to the landlord.
On April 30, a taxpayer, who has forgotten about the April 15 deadline to make a tax-deductible individual retirement account (IRA) contribution for the previous tax year, backdates a check to April 1 and mails the check to her financial advisor.
On July 4, a car owner, who did not pay his car insurance premium for July, crashes his car into a parked vehicle while texting. The backdating scheme involved moving the effective date for exercising the options from when the options were 'out of the money' to a date that made the options 'in the money' to allow certain executives to exercise their options profitably. Here are a few examples of situations where backdating _may_ be acceptable:
A person wants to buy a life insurance policy and make it effective beginning at a date prior to the current date. Backdating is the practice of marking a check, contract, or other legally binding agreement with a date that is prior to the current date.

Backdating

Bait and switch is an unethical practice in sales whereby the actual product for sale differs substantially from its advertised quality or other attributes.

Bait and switch is a morally suspect sales tactic that lures customers in with specific claims about the quality or low prices on items that turn out to be unavailable in order to upsell them on a similar, pricier item. In a mortgage bait and switch, an agent or company will post exceedingly low mortgage rates, knowing full well that the vast majority of applicants will be unable to qualify for these teaser rates. Bait and switch is a morally suspect sales tactic that lures customers in with specific claims about the quality or low prices on items that turn out to be unavailable in order to upsell them on a similar, pricier item. It is perfectly legal in the U.S. for a business to advertise a teaser item that is stocked in a limited amount (a loss leader, for example) as long as they also advertise that a limited number are available and offer a rain check if the item sells out. However, no matter how aggressive the advertiser is in attempting to upsell a potential customer to a more expensive product if they can sell the advertised teaser product, there is no course of action for the consumer.

The Bait and Switch

A Banker Trojan is a malicious computer program designed to gain access to confidential information stored or processed through online banking systems.

A Banker Trojan is a malicious computer program designed to gain access to confidential and/or material information stored or processed through online banking systems. Once installed, the Banker Trojan can gain access to computer files and systems, which attackers use to make unauthorized transactions, steal clients' identities, or withdraw client funds to attackers' accounts. Banker Trojan is a Trojan horse that redirects traffic from online banking and financial websites to another website, ostensibly a website that the attacker has access to. Computer viruses, malware, and Trojan horses can still steal usernames and passwords, but many are moving to a real-time collection and can transfer money to other accounts in clever ways.
Financial institutions have combatted the effectiveness of such Trojan horse programs by increasing the security of their authentication processes. A banker Trojan is a piece of malware that attempts to steal credentials from a financial institution's clients, or gain access to their financial information.

Banker Trojan

In common law, barratry is the offense committed by people who are overly officious in instigating or encouraging prosecution of groundless litigation.

Penal Code, Title 8. Offenses Against Public Administration

Barratry is a legal term describing an illegal act whereby an attorney instigates a dispute or otherwise encourages the filing of an otherwise frivolous lawsuit, in order to profit from legal fees. For example, some states like Texas that take barratry more seriously even prohibit lawyers from being the first to initiate contact with a future potential client (as some are feared to show up overeager to accident scenes).﻿﻿ A lawyer soliciting employment on a case, forcing an individual to take on a case through threat or coercion, or even beginning to work on and file a case behind someone's back are all considered examples of barratry. Barratry is a legal term describing an illegal act whereby an attorney instigates a dispute or otherwise encourages the filing of an otherwise frivolous lawsuit, in order to profit from legal fees. In maritime law, barratry is the commission of an act by the master or mariners of a vessel for an unlawful or fraudulent purpose that is contrary to the duty owed to the owners, by which act the owners sustain an injury. A lawyer who coerces or threatens an individual into taking on a case or filing and initiating billable work on a case behind someone's back would both be considered examples of barratry.

Barratry

Bernie Madoff is an American financier who ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.

Bernard Lawrence "Bernie" Madoff was an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors out of tens of billions of dollars over the course of at least 17 years, and possibly longer. As the selling continued, Madoff became unable to keep up with a cascade of client redemption requests and, on Dec. 10, according to the account he gave Fishman, Madoff confessed to his sons Mark and Andy, who worked at their father's firm. Madoff's firm claimed to be making money even when the S&P was falling, which made no mathematical sense, based on what Madoff claimed he was investing in. Markopolos also learned Madoff was applying for huge loans from European banks (seemingly unnecessary if Madoff's returns were as high as he said). In addition, a Madoff Victim Fund (MVF) was created in 2013 to help compensate those Madoff defrauded, but the Department of Justice didn't start paying out any of the roughly $4 billion in the fund until late 2017.

Bernie Madoff

Bid rigging is an illegal practice that involves competing parties colluding to choose the winner of a bidding process.

Fighting Bid Rigging in Public Procurement

Price Fixing, Bid Rigging, and Market Allocation Schemes: What They Are and What to Look For

Bid rigging is an illegal practice in which competing parties collude to determine the winner of a bidding process. **Bid suppression**: Bid suppression occurs when one (or more) bidder(s) sit out of a bidding process so another party is guaranteed to win a bidding process.
**Complementary bidding**: Complementary bidding occurs when companies intentionally submit uncompetitive bids as a way of guaranteeing that their bid is not selected and helping to ensure that another preselected bidder is chosen. Bid rigging is a form of anticompetitive collusion and is an act of market manipulation; when bidders coordinate, it undermines the bidding process and can result in a rigged price that is higher than what might have resulted from a free market, competitive bidding process. Although bid rigging can take many different forms, one of the most common practices of bid rigging occurs when companies decide in advance who will win a bidding process. Some forms of bid rigging can be categorized more broadly:
**Bid rotation**: Bid rotation is a form of market allocation and occurs when bidding companies take turns at being the winning bidder.

Bid Rigging

A bidding ring is a group of individuals or businesses that collude to keep low the prices of assets for sale at auction by not bidding against each other.

A bidding ring is a group of individuals or businesses that collude to keep low the prices of assets for sale at auction by not bidding against each other. Members of a bidding ring profit by winning auction items at suppressed prices in the legal, public auction and then re-auctioning them later in a private auction made up of the bidding ring members. A bidding ring is a group of individuals or businesses that collude to keep low the prices of assets for sale at auction by not bidding against each other. Another option would be to have a group of businesses agree to rotate when bidding for contracts, with some members participating in the contract bidding and others not participating at all. According to game theory, each member of the bidding ring or cartel has an incentive to cheat in certain scenarios, which will allow the cheating member to obtain a greater proportion of the benefit.

Bidding Ring

Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes.

Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. Most black money holders attempt to convert the money into legal money, also known as white money. Black money can be illegally disguised as legitimate money through money laundering. In addition to some of the clearly immoral activities, such as human trafficking, that are pursued to obtain black money, black money itself creates issues. Recipients of black money must hide it, spend it only in the underground economy, or attempt to give it the appearance of legitimacy through money laundering.

Black Money

A black market is an economic activity that takes place outside government-sanctioned channels.

Inside the FBI Takedown of the Mastermind Behind Website Offering Drugs, Guns, and Murders for Hire

The Dream of the Silk Road Is Alive on the Darknet

Table of Contents
What Is a Black Market?
Understanding a Black Market
Types of Black Markets
The Necessity of Black Markets
Example of a Black Market The goods and services offered in a black market can be illegal, meaning their purchase and sale are prohibited by law, or they can be legal but transacted to avoid taxes.
Black markets are also known as shadow markets or underground markets.
A black market is an economic activity that occurs outside of government-sanctioned channels. A black market is any market where the exchange of goods and services takes place in order to facilitate the transaction of illegal goods or to avoid government oversight and taxes, or both. A black market can be a physical market where two individuals meet to exchange illegal goods, for example, a drug transaction on a street corner. One of the most recent examples of a black market using modern technology was that of the Silk Road black market.

Black Market

A boiler room is an operation that features high-pressure salespeople peddling speculative securities. Read how to spot and avoid boiler room scams. 

SEC announces Charges in Massive Telemarketing Boiler Room Scheme Targeting Seniors

Table of Contents
What Is a Boiler Room?
Understanding Boiler Room
How a Boiler Room Operates
How to Spot and Avoid Boiler Room Scams A boiler room is a scheme in which salespeople apply high-pressure sales tactics to persuade investors to purchase securities, including speculative and fraudulent securities. In a typical penny stock scam, operators would first accumulate a small-cap stock at a low price, and then use boiler-room tactics to find buyers for an inflated price. The term _boiler room_ refers to an early practice of running such operations in the basement or boiler room of a building and is so called due to high-pressure selling. According to the Securities and Exchange Commission (SEC), the people involved in a boiler room scheme reach out to investors through cold calls, which are unsolicited calls to people with whom the salesperson has had no prior contact.

Boiler Room

A bribe is an illegal act in which a gift (for example, money) is given with the goal of influencing an outcome.

Chapter 11—Bribery, Graft, and Conflicts of Interest

Global Cost of Corruption at Least 5 Per Cent of World Gross Domestic Product, Secretary-General Tells Security Council, Citing World Economic Forum Data

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

A bribe is an illegal act involving the exchange of something of value, such as money, with the purpose of influencing the behavior of public officials. Under Section 201 of Title 18 of the U.S. Code, bribery includes indirectly influencing any official act by corruptly giving, offering, or promising anything of value to a public official.﻿﻿ Bribes are often made with money through offering, giving, receiving, or soliciting special favors to public officials such as judges or heads of regulatory agencies to elude convictions or unfavorable court rulings, or as an incentive for the payee to alter or overlook pertinent regulations that would otherwise restrict the payer. To prevent bribery, the OECD Council established the Anti-Bribery Convention, which seeks to eliminate corruption in developing nations by introducing sanctions against bribery in certain international business transactions of companies based in member countries. Although most developed nations have practices similar to the United States, some developing and a few developed nations allow bribes to be tax deductible. The United States prohibits bribes as being recorded for tax purposes because they stifle the democratic process, encourage unethical behavior, and conflict with the principles of freedom and equality.

Bribe

A bust-out is a type of fraud that aims to max out an acquired credit or debit card with no intention of paying the bill.

A bust-out is a type of credit card fraud where an individual applies for a credit card, establishes a normal usage pattern and solid repayment history, then racks up numerous charges, and maxes out the card with no intention of paying the bill. Examples of activity that may indicate a bust-out in progress include:
A sudden large dollar amount of purchases at a merchant where the cardholder normally only makes small purchases
A credit report history of frequent consumer requests for new credit cards or higher credit limits
A credit report history that doesn’t go back very far in time and doesn’t have a mix of different types of credit, like auto loans and mortgages in addition to the credit cards.
There are also legitimate reasons why consumers might have these types of activity, but further studying a consumer’s various credit cards from different issuers and comparing the activity across those cards can indicate whether a bust-out has occurred or could be imminent.
Automation is leading to bust-outs becoming an even more significant problem than they already are. A bust-out most commonly involves regular credit cards but can also be carried out with a closed-loop store credit card, home equity line of credit (HELOC), or another form of revolving credit. A bust-out most commonly involves regular credit cards but can also be carried out with a closed-loop store credit card, home equity line of credit (HELOC), or another form of revolving credit. A bust-out is a type of credit card fraud where an individual applies for a credit card, establishes a normal usage pattern and solid repayment history, then racks up numerous charges, and maxes out the card with no intention of paying the bill.

Bust-Out

Caveats have many applications in law and finance, pertaining to all parties involved being aware of all of the facts of a legal proceeding or transaction. 

The term caveat refers to a notice, warning, or word of caution provided to an individual or entity before they take action. The most common usage of the term is as a caveat emptor, which states that a buyer should exert caution and cannot recover damages when they purchase an inferior product. When someone adds a caveat to a contract or a legal situation, they effectively add a warning that the other party should be alerted to the possibility of a dangerous or undesirable circumstance if they proceed any further. The term caveat refers to a notice, warning, or word of caution provided to an individual or entity before they take action. The securities were backed by multiple tranches of residential mortgages of differing credit quality, and the securities were known to include sub-prime mortgages.

Caveat Defintion

Channel stuffing is an unethical method of deceptively inflating sales figures by forcing an oversupply of product onto retail and distribution channels, such as a car manufacturer to dealerships.

Bristol-Myers Squibb Company Agrees to Pay $150 Million to Settle Fraud Charges

Accounting and Auditing Enforcement Release No. 2075 / August 4, 2004

Channel stuffing is a deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending retailers along its distribution channel more products than they are able to sell to the public. Channel stuffing refers to the practice of a company shipping more goods to distributors and retailers along the distribution channel than end-users are likely to buy in a reasonable time period. Channel stuffing is a deceptive business practice used by a company to inflate its sales and earnings figures by deliberately sending retailers along its distribution channel more products than they are able to sell to the public. > Bristol-Myers inflated its results primarily by stuffing its distribution channels with excess inventory near the end of every quarter in amounts sufficient to meet its targets by making pharmaceutical sales to its wholesalers ahead of demand. > For two years Bristol-Myers deceived the market into believing that it was meeting its financial projections and market expectations, when, in fact, the company was making its numbers primarily through channel-stuffing and manipulative accounting devices.

Channel Stuffing

Cheapjack is a noun or adjective used to describe an itinerant seller of inexpensive goods.

The term "cheap Jack" (sometimes "cheapjack") refers to a seller of cheap or inferior quality goods. In the middle ages, as rural towns began to flourish, peddlers would transport goods directly to homes, saving customers the inconvenience of traveling to markets or fairs, and peddlers would surcharge for this convenience. Such peddlers may operate as door-to-door salespeople or street vendors, particularly in urban environments and near formal markets, fairs, and other commercial gatherings. Street vendors remain a common aspect of street fairs, concerts, sporting events, and other public gatherings, and Cheapjacks can, unfortunately, still form a small percentage of the peddlers at these types of events. Existing throughout the history of the exchange of goods, a cheapjack peddler is often seen as itinerant, making direct contact with potential customers as opposed to operating from a fixed, brick-and-mortar place of business.

Cheapjack

Circular trading is a fraud scheme that creates artificial trading activity by passing shares among a closed group.

Circular trading is a fraudulent scheme where sell orders are entered by a broker who knows that offsetting buy orders for the exact same number of shares at the same time and, at the same price, have either been or will be entered. For example, if the trading price of a security was on a trajectory to fall below levels desired by certain shareholders, a circular trade could serve to buttress the share price by giving the impression that new owners are buying the stock at the desired level. A circular trading scheme typically requires several participants to create the illusion of shares being acquired by new owners when, in fact, the same shares are simply passed through with no actual change in value. Circular trading is a fraudulent scheme where sell orders are entered by a broker who knows that offsetting buy orders for the exact same number of shares at the same time and, at the same price, have either been or will be entered. Some initial public offerings (IPOs) and penny stocks may be especially susceptible to circular trade schemes, particularly if certain shareholders want to create the appearance of intense trading activity and buzz surrounding a stock.

Circular Trading

Click fraud is the act of illegally clicking on pay-per-click ads to increase site revenue or to exhaust advertisers’ budgets.

Click fraud is the act of illegally clicking on pay-per-click (PPC) ads to increase site revenue or to exhaust a company's advertising budget. Click fraud is the act of illegally clicking on pay-per-click (PPC) ads to increase site revenue or to exhaust a company's advertising budget. The easiest, least detectable way to commit click fraud is to create a website that hosts banner ads and click on those ads as much as possible to generate revenue. Click fraud happens with pay-per-click advertising and may involve either a human, a computer program, or an automated script pretending to be a legitimate user and clicking on paid search advertising with no intention of purchasing something. Click fraud is the illegal practice of spoofing pay-per-click (PPC) advertisements to increase site revenue or to deplete a company's advertising budget.

Click Fraud

Computer abuse is the use of a computer to do something improper or illegal. It was codified in 1984 with the CFAA.

Computer abuse is the legal term for the use of a computer to carry out improper or illegal activities, but which do not constitute financial crimes that would be classified as wire fraud. Examples of computer abuse include using a computer to expose personally identifiable information (PII) such as Social Security numbers, using a computer to change the content of a website owned by someone else, intentionally infecting one computer with a virus or worm that will spread to other computers, using a computer to illegally share copyrighted items, or using one computer to gain unauthorized access to another. While the law was intended for the prosecution of hackers committing computer abuse by stealing valuable personal or corporate information, or causing damage when they break into a computer system, Congress has expanded the scope of the CFAA five times so that activities that were once considered misdemeanors are now federal felonies. Some definitions of computer abuse consider computer crime to be a type of computer abuse. Other examples of computer abuse include cyberbullying and using a work computer for personal tasks on company time.

Computer Abuse

"Cook the books" is a slang term for using accounting tricks to make a company's financial results look better than they really are.

Cook the books is a slang term for using accounting tricks to make a company's financial results look better than they really are. For example, if a company had 1,000,000 outstanding equity shares and recorded net income or profit of $150,000, the company's EPS would be .15 cents per share ($150,000 / 1,000,000).
However, if the company bought back 200,000 shares and recorded the same profit in the next quarter, the EPS would increase to .19 cents per share ($150,000 / 800,000).
Since company executives forecast their earnings per share for each upcoming quarter, beating that forecast can help create a positive image for the company and lead to a jump in the stock price. Among other things, it required that the senior officers of corporations certify in writing that their company's financial statements comply with SEC disclosure requirements and fairly present in all material aspects the operations and financial condition of the issuer.﻿﻿ The U.S. Securities and Exchange Commission (SEC) helps to maintain a fair and orderly financial market, which includes various financial reporting requirements for publicly-traded companies. Typically, cooking the books involves manipulating financial data to inflate a company's revenue and deflate its expenses in order to pump up its earnings or profit. Typically, cooking the books involves manipulating financial data to inflate a company's revenue, deflate expenses, and pump up profit.

Cook the Books

Copyright infringement is the use or production of copyright protected material without the permission of the copyright holder.

Definitions: What is Copyright Infringement

In the United States Court of Appeals for the Ninth Circuit, A&M RECORDS, INC., et al. v. NAPSTER, INC.

Copyright infringement is the use or production of copyright-protected material without the permission of the copyright holder. The Copyright Office doesn't actually prosecute those who violate copyright law but instead, assist the U.S. Department of Justice (DOJ) on the court cases and the necessary legal documentation.
Copyright infringement issues have varied over the years, but with rapid advances in technology, the Copyright Office has faced a growing number of issues in an effort to keep pace with innovation.
Modern technology makes it relatively easy to copy a product or information, and some companies derive a substantial part of their revenue from replicating what other companies have created. Other parties may be granted permission to use those works through licensing arrangements or buy the works from the copyright holder.
Individuals and companies who develop new works and register for copyright protection do so in order to ensure that they can profit from their efforts. Copyright infringement is the use or production of copyright-protected material without the permission of the copyright holder. Copyright infringement is the use or production of copyright-protected material without the permission of the copyright holder.

Copyright Infringement

To corner in an investing context is to gain control over a business, stock, or commodity to the point where it is possible to manipulate the price.

SEC Files Charges in International Manipulation Scheme

Overseas Stock Manipulator Settles SEC Charges

In investing or trading, a corner is an act of one entity obtaining a controlling interest of a business, stock, commodity, or other security so that they may manipulate the price. A business or individual may attempt to corner a market using other methods, including:
Improperly limiting the number of publicly traded shares that are available
Making trades to create a false image of the demand for the security
Price rigging to artificially inflate the price of a stock
Painting the tape is another type of market manipulation that occurs when a group of market players attempts to control a stock's price by buying and selling the security among themselves, creating the illusion of significant trading activity. The stock manipulator, who had a significant stake in the company, ran a fraudulent promotional campaign to inflate the stock price, dumping the shares once the share price increased. In Aug. 2017, the SEC settled a case with an overseas stock manipulator, who was accused of a pump-and-dump scheme to artificially boost the stock price of a small oil and gas company. In an investing context, a corner refers to when an individual, group, or business gains control over a company, stock, or commodity to the point where it is possible to manipulate the price.

Corner

Corporate fraud refers to dishonest activities conducted to give an advantage to an individual or company.

Corporate fraud refers to illegal activities undertaken by an individual or company that are done in a dishonest or unethical manner. If a company or individual claims it is putting some of its funds towards investments or other types of monetary reserves that are intended to gain in value, but in actuality, those funds have been expended or diverted elsewhere, this counts as a type of corporate fraud. Other forms of corporate fraud may aim to disguise or misrepresent a service or product the company is developing or has in service, hiding its flaws or defects. Multiple stakeholders involved in corporate fraud also allows for elaborate fraud schemes to be protected by a group of complicit actors. Corporate fraud refers to illegal activities undertaken by an individual or company that are done in a dishonest or unethical manner.

Corporate Fraud

Corporate kleptocracy describes the greed of corporate executives who use underhanded tactics to siphon off wealth at the expense of shareholders.

Report of Investigation by the Special Committee of the Board of Directors of Hollinger International

Executive Grant of Clemency - Conrad Moffat Black

Corporate kleptocracy is a phrase that describes the greed of corporate executives who use underhanded tactics to siphon off wealth at the expense of shareholders. The executives were accused of using company funds for personal use of the company jet as well as clothing and gifts for Black's wife. The report accused Black and the company's chief operating officer, David Radler, of bleeding $400 million from Hollinger over a seven-year period via shady management and non-compete fees. Leveraged buyout firm KKR subsequently acquired RJR Nabisco for $25 billion, in one the largest leveraged buyouts in U.S. history, and ousted Johnson as CEO after he had essentially drained the company coffers dry. The phrase came into being as part of a report that accused ex-Hollinger CEO Conrad Black and his associates of allegedly embezzling hundreds of millions of dollars from the company from 1997 to 2003.

Corporate Kleptocracy

Corruption is dishonest behavior by those in positions of power, such as managers or government officials. Corruption can include giving or accepting bribes or inappropriate gifts, double-dealing, under-the-table transactions, and more.

Five Major Banks Agree to Parent-Level Guilty Pleas

SEC: Tech Company Bribed Chinese Officials

Corruption is dishonest behavior by those in positions of power, such as managers or government officials. In 2016, the Securities and Exchange Commission (SEC) ordered software company PTC Inc. to pay a combined $28 million in fines for attempting to bribe Chinese officials by providing approximately $1.5 million in recreational travel through two PTC China-based subsidiaries.﻿﻿ As the case became increasingly public, PTC Inc. has needed to strike a delicate public relations effort to restore its reputation. In the financial services industry, chartered financial analysts and other financial professionals are required to adhere to a code of ethics and avoid situations that could create a conflict of interest. In the financial services industry, chartered financial analysts and other financial professionals are required to adhere to a code of ethics and avoid situations that could create a conflict of interest. Preventing corruption includes the reinforcement of best business practices, education in the form of mandatory anti-money laundering (AML) courses, and increased accountability.

Corruption

A daisy chain is a group of unscrupulous investors who artificially inflate the price of a security so that they sell it at a profit. All daisy chain scams are considered an illegal practice in the public markets.

Daisy chain is a term used to describe a group of unscrupulous investors who, when practicing a kind of fictitious trading or wash selling, artificially inflate the price of a security they own so it can be sold at a profit. The group of investors associated with the daisy chain then waits until the small-cap stock reaches peak levels and sells its long position. A group of investors teams up to create a daisy chain by purchasing long positions in a low-priced and thinly traded small-cap stock. In fact, sometimes these unsuspecting investors increase their positions as the stock prices fall, thinking they are buying a dip, only to find the stock will never again reach its unnatural peak. Someone who isn’t part of the chain will see that the stock sold for $60 during the day, and, thinking it’s a good investment because of the $10 price increase, will jump in to purchase the stock.

Daisy Chain

Debt restructuring fraud is an illegal technique where an individual or corporation hides or transfers assets before filing for bankruptcy. 

Debt restructuring fraud is an illegal technique in which an individual or corporation hides or transfers assets before filing for bankruptcy. By knowingly concealing or misstating assets, the debtor is abusing the process (and its creditors) to escape financial liabilities while holding onto the wealth that those liabilities helped create.
Debt restructuring fraud is prosecuted under 18 U.S.C. Chapter 9, which can result in a fine of $250,000 plus a prison sentence of up to five years.
The guiding principle of bankruptcy is for the creditors and debtors to find a compromise that works for both sides. Other forms of bankruptcy fraud include forging legal documents or having intentionally incomplete forms, bribing court officials or others involved in the legal process, and filing for bankruptcy multiple times (or using false information to do so) to claim the benefits. Debt restructuring fraud is an illegal technique in which an individual or corporation hides or transfers assets before filing for bankruptcy. Debt restructuring fraud is an illegal technique in which an individual or corporation hides or transfers assets before filing for bankruptcy.

Debt Restructuring Fraud

Disgorgement is repayment of ill-gotten gains that is imposed on wrongdoers by the courts. Funds are paid back with interest to those affected.

Investor Bulletin: The Foreign Corrupt Practices Act – Prohibition of the Payment of Bribes to Foreign Officials

Kokesh v. Securities and Exchange Commission

Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO

Deciding On Utilities: Public or Private?

Disgorgement is the legally mandated repayment of ill-gotten gains imposed on wrongdoers by the courts. In 2010 Lloyd Blankfein, CEO of Goldman Sachs, put on an aggressive facade to avoid a lawsuit brought forth by the SEC for his bank's role in selling a complex financial instrument tied to subprime mortgages to investors. Individuals or companies that violate Securities and Exchange Commission (SEC) regulations are typically required to pay both civil money penalties and disgorgement. The latter was coined in a 1974 New York Times op-ed about New York State's decision to buy two half-finished power plants from the struggling electric utility ConEd for $500 million, using taxpayer dollars to spread out the cost of the losing venture. In June 2017, a unanimous ruling by the U.S. Supreme Court in the case of Kokesh v. SEC clarified that disgorgement is a penalty that is subject to a five-year statute of limitations.

Disgorgement

Double dipping describes a broker that puts commissioned products into a fee-based account thereby unethically earning money from both sources.

Double dipping is an unethical practice. Double dipping by a broker can take place in managed accounts or wrap accounts, in which a broker manages a client's account in exchange for a flat quarterly or annual fee, usually around 1% to 3% of assets under management. Double dipping may take other forms, such as when employees covered by a state or municipal pension retire, which triggers the start of pension payments, and then are rehired in the same role from which they retired a few days later with little more than a slight title change. Double dipping is an unethical practice whereby a broker places commissioned products into a fee-based account to earn money from both sources. Double dipping also occurs when employees covered by a state or municipal pension retire, begin to receive pension payments, and then are rehired a few days later with a slight title change.

Double Dipping

Duress is the act of using force, false imprisonment, coercion, threats or psychological pressure to compel someone to act contrary to their interests.

Duress describes the act of using force, false imprisonment, coercion, threats, or psychological pressure to compel someone to act contrary to their wishes or interests. If a person is acting under duress, they are not acting of their own free will and so may be treated accordingly in court proceedings.
If an individual (or business) is under financial duress, they are often without good solutions to their financial woes. If duress is used to make a person commit a crime or do something against their will, the defendant in a criminal prosecution may raise the defense that others used duress to force them to take part in the crime. Unlawful practice of economic pressure can cause duress to a person, risking them to commit involuntarily to a risky financial practice as well. In a sense, financial duress puts a business between a rock and a hard place where no good solution exists.

Duress

Embezzlement is a form of fraud wherein a person or entity intentionally misappropriates assets for personal use.

What evidence is required to prove embezzlement?

Table of Contents
Expand How Embezzlement Occurs
How to Prevent Embezzlement
Embezzlement FAQs
Embezzlement refers to a form of white-collar crime in which a person or entity misappropriates the assets entrusted to them. White-collar crimes include fraud, theft, counterfeiting, embezzlement, money laundering, and other fraudulent schemes. For instance, an embezzler might create bills and receipts for business activities that never took place or services that were never rendered to disguise the transfer of funds as a legitimate transaction. To legally prove embezzlement, the claimant must prove that the perpetrator had a fiduciary responsibility to the victim and that the embezzled asset was acquired through that relationship and conveyed to the accused intentionally.
A person can be held civilly and criminally responsible for embezzling.

Embezzlement

Enronomics was a fraudulent accounting technique used by criminal executives at long-dead Enron Inc. that involved hiding losses in subsidiary books.

The Enron Collapse: An Overview of Financial Issues

Financial Oversight of Enron: The SEC and Private-Sector Watchdogs

Federal Jury Convicts Former Enron Chief Executives Ken Lay, Jeff Skilling On Fraud, Conspiracy And Related Charges

A review of FASB action post-Enron and Worldcom

The term Enronomics refers to a fraudulent accounting technique used by executives and accountants at Enron to hide losses, toxic assets, and massive amounts of debt from shareholders and the general public. The term Enronomics refers to a fraudulent accounting technique used by executives and accountants at Enron to hide losses, toxic assets, and massive amounts of debt from shareholders and the general public. The term Enronomics refers to fraudulent accounting technique used by executives and accountants at Enron to hide losses, toxic assets, and debt from shareholders and the general public. The company used mark-to-market accounting methods to value assets at their fair market value on the company's balance sheets and to highlight so-called profits. The company used mark-to-market (MTM) accounting methods, which allowed assets to be noted at their fair market value on the company's balance sheets and highlight so-called profits.

Enronomics

Expunge is the act of eliminating a formal customer complaint lodged against a securities broker from FINRA's public records.

Frequently Asked Questions about FINRA Rule 2080 (Expungement)

FINRA Amends Arbitration Codes to Apply Minimum Fees to Requests for Expungement of Customer Dispute Information

Expunge is the act of eliminating a formal customer complaint lodged against a securities broker from the Financial Industry Regulatory Authority's (FINRA) public records. Customer complaints that have been submitted to FINRA about unethical broker conduct are entered into the CRD system, placed in FINRA's public BrokerCheck website, and recorded on the broker's Form U-4. Even if a complaint is later dropped or FINRA arbitrators conclude that a complaint lacks merit, the complaint will still appear in FINRA BrokerCheck. The broker must hold an in-person or telephonic session with an arbitration panel to plead their case; this panel then must agree to pass on the case to another set of adjudicators, and if they concur the broker then must return to FINRA to seek the removal of the undesired record. Expunge is the act of eliminating a formal customer complaint lodged against a securities broker from the Financial Industry Regulatory Authority's (FINRA) public records.

Expunge

Extortion is the wrongful use of actual or threatened force, violence, or intimidation to gain money or property from an individual or entity.

9-131.000 - The Hobbs Act - 18 U.S.C. § 1951

2403. Hobbs Act - Extortion by Force, Violence, or Fear

What You Need to Know About the WannaCry Ransomware

How a Major Oil Pipeline Got Held for Ransom

Extortion is the wrongful use of actual or threatened force, violence, or intimidation to gain money or property from an individual or entity. In order to prove a violation of Hobbs Act extortion, responses to the following points must be in the affirmative:
1.  Did the defendant induce or attempt to induce the victim to give up property or property rights?
2.  Did the defendant use or attempt to use the victim’s reasonable fear of physical injury or economic harm to induce the victim’s consent to give up property?
3.  Did the defendant’s conduct actually or potentially obstruct or affect interstate or foreign commerce in any way?
4. These are as follows:
1.  Did the defendant induce or attempt to induce the victim to give up property or property rights
2.  Did the defendant use or attempt to use the victim's reasonable fear of physical injury or economic harm in order to induce the victim's consent to give up property?
3.  Did the defendant's conduct actually or potentially obstruct, delay, or affect interstate or foreign commerce in any (realistic) way or degree? Once this self-propagating malware or “worm” was inside the network, it silently infected other vulnerable computers.
Robbery is considered to be the most common form of extortion.
According to Symantec, WannaCry was much more dangerous than common ransomware “because of its ability to spread itself across an organization’s network by exploiting critical vulnerabilities in Windows computers, which were patched by Microsoft in Windows 2017.” On a smaller scale, such cyber extortion typically involves the use of malicious software (malware) known as ransomware, in which a person’s computer files are encrypted, rendering them unusable until a ransom in Bitcoin has been paid.

Extortion

A facilitating payment is a financial payment that may constitute a bribe and is made with the intention of expediting an administrative process.

Implementing the OECD Anti-Bribery Convention

H.R.4848—Omnibus Trade and Competitiveness Act of 1988

15 U.S.C. 78dd-1(b)—Prohibited Foreign Trade Practices by Issuers

Anti-Corruption Policies and Measures of the Fortune Global 500

A facilitating payment is a financial payment that may constitute a bribe and is made with the intention of expediting an administrative process. However well-intentioned, in reality, entities and individuals struggle with the limitations of the thin facilitating payment exception—as it’s often difficult to determine when lines have been crossed between an illegal bribe and an exception permissible facilitating payment.
An example of a facilitating payment is illustrated in the following scenario. It is a payment made to a public or government official that acts as an incentive for the official to complete some action or process expeditiously, to the benefit of the party making the payment.
Facilitating payments are payments made to officials with the intention of expediting an administrative process. In some countries, these payments are considered normal, whereas in other countries, facilitating payments are prohibited by law and considered bribes. Certain countries do not consider facilitating payments bribes—as long as such payment is not made to earn or maintain business, or to create an unfair or improper advantage over another business.

Facilitating Payment

The Financial Action Task Force (FATF) is an intergovernmental organization that promotes policies to combat money laundering and terrorist financing. 

The Financial Action Task Force (FATF) is an intergovernmental organization that designs and promotes policies and standards to combat financial crime. The Financial Action Task Force (FATF) makes recommendations for combating financial crime, reviews members' policies and procedures, and seeks to increase acceptance of anti-money laundering regulations across the globe. Recommendations created by the Financial Action Task Force (FATF) target money laundering, terrorist financing, and other threats to the global financial system. A list of recommendations to combat terrorist financing was added in 2001, and in the latest update, published in 2012, the recommendations were expanded to target new threats, including financing the spread of weapons of mass destruction. Once a member, a country or organization must endorse and support the most recent FATF recommendations, commit to being evaluated by (and evaluating) other members, and work with the FATF in the development of future recommendations.

Financial Action Task Force (FATF)

Financial forensics is a field that combines criminal investigation skills with financial auditing skills to identify criminal financial activity.

Certified in Financial Forensics (CFF) Credential Overview

James Chanos, President, Kynikos Associates

Senate Hearing 111-368. Oversight of the Securities and Exchange Commission’s Failure to Identify the Bernard L. Madoff Ponzi Scheme and How to Improve SEC Performance

The Madoff letters: Newly revealed correspondence shows the deceased con man’s efforts to shape his legacy

Financial forensics is a field that combines criminal investigation skills with financial auditing skills to identify criminal financial activity coming from within or outside of an organization. Financial forensics is a field that combines criminal investigation skills with financial auditing skills to identify criminal financial activity coming from within or outside of an organization. Financial forensics is similar to forensic accounting, which utilizes accounting, auditing, and investigative skills to analyze a company's financial statements for possible fraud in conjunction with anticipated or ongoing legal action. Financial forensics is a field that combines criminal investigation skills with financial auditing to uncover criminal activities carried out by individuals or companies. To become certified in financial forensics, an individual must be a certified public accountant (CPA), pass the Certified Financial Forensics (CFF) exam, and meet certain requirements.

Financial Forensics

Financial shenanigans are actions designed to misrepresent the true financial performance or financial position of a company or entity. 

Financial shenanigans are actions designed to misrepresent the true financial performance or financial position of a company or entity. Financial shenanigans can be broadly classified into a few different types:
1.  Schemes that manipulate financial reporting through aggressive, creative, or fraudulent methods.
2.  Entities that are based on fraudulent founding or work as a front for fraudulent activities.
3.  Independent scammers or fraudulent groups that seek to steal financial information such as credit cards or account numbers. Financial shenanigans can also involve financial statement manipulation, which provides nearly unlimited opportunities for taking aggressive, creative, and fraudulent actions for the advantage of some form of financial gain. Minority active ownership accounting rules that apply to companies holding 20%-50% ownership in a subsidiary, joint venture, or special purpose vehicle can create several opportunities for financial shenanigans and financial reporting manipulation. Financial shenanigans can encompass fraudulent accounting, fraudulent entities, or fraudulent acts that seek to steal financial information.

Financial Shenanigans

The Financial Crimes Enforcement Network (FinCEN) is a regulatory agency created to enforce money laundering rules and laws.

FinCen Announces Acting Director and New Deputy Director.

The Financial Crimes Enforcement Network (FinCEN) is a government bureau that maintains a network whose goal is to prevent and punish criminals and criminal networks that participate in money laundering and other financial crimes. To fulfill its duties to detect and deter financial crimes, FinCEN can issue and interpret relevant regulations that have been authorized by statute, enforce compliance with said regulations, and coordinate and analyze data related to compliance examination functions that were delegated to other regulators. The Financial Crimes Enforcement Network (FinCEN) is a government bureau that maintains a network whose goal is to prevent and punish criminals and criminal networks that participate in money laundering and other financial crimes. FinCEN received duties and responsibilities from Congress to serve as a central collection hub, provide analysis, and disseminate data to support the financial industry as well as government partners at local through international levels. FinCEN, administered by the U.S. Department of the Treasury, operates domestically and internationally, and it consists of three major players—law-enforcement agencies, the regulatory community, and the financial-services community.

Financial Crimes Enforcement Network (FinCEN)

The first to file rule states that whoever is the first party to file a lawsuit is awarded their home courts for the location of the trial or legal proceedings.

A 'Procedural Nightmare': Dueling Courts and the Application of the First-Filed Rule

The first to file rule can mean different things depending on the context. In the context of intellectual property and patent filing, the first to file rule ensures that the first person to file a patent for an invention usually gains the right to sell the invention. The first to file rule also applies to patent applications, awarding the first person to file a patent the right to claim the intellectual property to it. In the context of federal court proceedings, the first to file rule states that whoever is the first party to file a lawsuit is awarded their home courts for the location of the trial or legal proceedings. The first to file rule has a relatively short grace period between applicants to acquire the specific and individual patent, and an inventor should file before disclosing any details with the invention to include offering the item for sale.

First to File Rule

Fraud, in a general sense, is purposeful deceit designed to provide the perpetrator with unlawful gain or to deny a right to a victim.

Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud. The Federal Bureau of Investigation (FBI) describes securities fraud as criminal activity that can include high yield investment fraud, Ponzi schemes, pyramid schemes, advanced fee schemes, foreign currency fraud, broker embezzlement, pump-and-dumps, hedge fund related fraud, and late-day trading. At heart, the individual or company committing fraud is taking advantage of information asymmetry; specifically, that the resource cost of reviewing and verifying that information can be significant enough to create a disincentive to fully invest in fraud prevention. Often, the perpetrator of fraud is aware of information that the intended victim is not, allowing the perpetrator to deceive the victim.

Fraud

Fraudulent conveyance is the illegal or unfair transfer of property to another party via a bankruptcy trustee. Two types of fraudulent conveyance exist, actual fraud and constructive fraud.

11 USC 548: Fraudulent Transfers and Obligations

Fraudulent conveyance is the illegal or unfair transfer of property to another party via a bankruptcy trustee. If the transfer of property is determined to be fraudulent, a court can require the person holding the assets (the person to whom the conveyance was made) to hand the assets, or an equivalent monetary value, over to the creditor. Fraudulent conveyance, also known as a fraudulent transfer, is an unfair transfer of assets related to a bankruptcy proceeding. Two types of fraudulent conveyance exist under current law: actual fraud and constructive fraud. Fraudulent conveyance is the illegal or unfair transfer of property to another party via a bankruptcy trustee.

Fraudulent Conveyance

Fullz (or "fulls") is a slang term that criminals who steal credit card information use to refer to a complete set of information on a fraud victim. 

Fullz (or "fulls") is a slang term for "full information" that criminals who steal credit card information use to refer to a complete set of information on a prospective fraud victim. Criminals buy and sell fullz on the black market, frequently conducted online, and use them to commit credit card fraud, tax refund fraud, medical identity theft, and other types of fraud or impersonation. For example, a credit card’s magnetic strip data, which can be used to make counterfeit cards for fraudulent purchases in stores, or a victim’s PayPal account information, which can be used to siphon funds from a victim’s bank account. Criminals also sell less complete data sets that include, for example, only enough credit card information to make fraudulent purchases online. However, they can still be used for refund scams, ordering credit cards on behalf of a victim, or opening a mule account (an account that will accept a fraudulent money transfer from a compromised account) without the victim’s knowledge.

Fullz

Ghosting is an illegal practice used to artificially change the price of a stock by having two or more market makers work together to drive the stock higher or lower.

In finance, ghosting is an illegal practice whereby two or more market makers collectively attempt to influence a stock's price. With ghosting, two or more market makers who are supposed to compete with each other team up to create a buying or selling frenzy surrounding a particular stock. In finance, ghosting is an illegal practice whereby two or more market makers collectively attempt to influence a stock's price. With ghosting, the actors manufacture a change in the market condition by the sudden increase of buying or selling of a stock. Insider trading gives those competitive firms informed of an upcoming event an unfair advantage, allowing them to buy or sell the corresponding stock before the public learns the new information.

Ghosting

Ginzy trading is the practice of selling part of an order at the offer price and the remainder to the same broker at the lower bid price. 

Ginzy trading is the practice of selling part of an order at the offer price and then the remainder to the same broker at the lower bid price. These regulations promote competitive and efficient futures markets, and as such prohibit the use of ginzy trading as it is a non-competitive trading practice. Ginzy trading is the practice of selling part of an order at the offer price and then the remainder to the same broker at the lower bid price. Regulators have deemed ginzy trading to be a non-competitive trading practice that violates the Commodity Exchange Act. Brokers engage in ginzy trading to try to avoid rules that prohibit trading a single order at various increments.

Ginzy Trading

Global recovery rate (GRR) can refer to businesses recovering fraud-related losses or to lending facilities that are recoverable, given a borrower's default.

PwC's Global Economic Crime and Fraud Survey 2020

2020 Global Study on Occupational Fraud and Abuse

The global recovery rate (GRR) refers to the amount that a business recovers from fraud-related losses. In regards to fraud-related losses for businesses, implementing procedures such as business crime insurance, early detection, and code of conduct practices can prevent and help recover losses.
Banks calculate exposure at default (EAD) to determine how much they will lose if a borrower defaults.
According to PricewaterhouseCoopers's 2020 Global Economic Crime Survey, 47% of firms experienced some form of economic crime over the previous two years.﻿﻿ Early detection of fraudulent activities and acquiring business crime insurance are two of the best methods of increasing the likelihood of recovering stolen assets. According to the 2018 report by the Association of Certified Fraud Examiners (ACFE), losses of $10,000 or less had a 30% chance of the total value being recovered, while losses between $101,000 and $1 million had a 13% chance of the total value being recovered, and losses of $1 million or more had an 8% chance of the total value being recovered. The global recovery rate is also defined as a complement to the loss given default (LGD).
Fraud is so widespread that according to the Association of Certified Fraud Examiners' (ACFE's) 2020 Global Study on Occupational Fraud and Abuse, there were 2,504 cases of occupational fraud in 125 countries for a total of more than $3.6 billion in losses. Global recovery rate when related to loan losses is used in the field of credit and banking and is usually expressed as a percentage of the exposure at default (EAD).

Crime and Fraud

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