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Post date: April 12 2016

A.G. Schneiderman Continues National Financial Literacy Month By Warning New Yorkers About Investment Scams

Tips Offered To Protect Consumers Against Investment Frauds

NEW YORK – To continue National Financial Literacy Month, Attorney General Eric T. Schneiderman today cautioned New Yorkers to be vigilant in protecting themselves against investment scams and released a list of tips for investors to use to protect themselves from financial fraud.

“Everyone is at risk of falling victim to financial fraud, so it is vital that we all know the steps to take to avoid these scams,” said Attorney General Schneiderman. “I urge all New Yorkers to educate themselves about investing and to report suspected instances of fraud to my office.”

Each year, the Office of the Attorney General investigates and prosecutes numerous investment scams targeting New Yorkers.  Recently, those cases have included:

  • In February 2015, Attorney General Schneiderman announced the felony conviction of Khawaja Saud Masud, 37, of Jersey City, NJ, for stealing over $1 million from his great-uncle and great-aunt by fraudulently soliciting them to invest in his purported hedge fund, RKS Capital, LP.  Masud pleaded guilty to Grand Larceny in the Fourth Degree and Securities Fraud under the Martin Act, both Class E felonies.  In exchange for his plea, Masud must pay a total of $500,000 in restitution.  As a result of his conviction, Masud also faces deportation. 
  • In June 2015, Attorney General Schneiderman shut down an unregistered investment scheme that violated New York’s Martin Act.  The purported “investment club” was operated by Byron Pierre, a resident of Queens County.   Pierre used Craigslist postings to direct victims to his website, which purported to advertise a real estate-related investment.  In fact, Pierre did not purchase any real estate for the investors with the money he solicited.   Pierre signed an Assurance of Discontinuance, agreeing to permanently stop selling securities.  Pierre also agreed to return all of the money he had solicited from investors.
  • In December 2015, Attorney General Schneiderman announced the conviction of Moazzam Ifzal Malik, a.k.a. Mark Malik, 33, of Lahore, Pakistan, for stealing over $800,000 from investors by fraudulently soliciting them to invest in his purported hedge funds, including Seven Sages Capital, L.P. and Wolf Hedge LLC.  Following a two-week trial in New York County Supreme Court, the jury convicted Malik of all counts charged in the Attorney General’s 28-count indictment, including Grand Larceny and Securities Fraud.  Malik was sentenced to 5 to 15 years in prison.  
  • In February 2016, Attorney General Schneiderman announced the convictions of William Vogt, a resident of Orange County, on felony charges in both Ulster County and New York County, for posing as internationally renowned fashion designer “Bill Bolland” to lure victims into making more than $400,000 in investments. Instead, Vogt stole the monies and used them for personal expenses.  Vogt pleaded guilty in New York County Supreme Court to Grand Larceny in the Second Degree, a Class “C” felony.  In December, Vogt previously pleaded guilty to Grand Larceny in the Third Degree, a Class “D” felony, in Ulster County Court.  Vogt faces up to 12 years in prison on both cases. 
  • Also in February 2016, Attorney General Schneiderman announced the conviction and sentencing of Frederick E. Monroe, Jr., 59, of Queensbury, New York, for stealing over $5 million from investors by fraudulently soliciting them to reinvest their retirement monies.  In December 2015, Monroe pleaded guilty in Albany County Court to Scheme to Defraud, Grand Larceny, Money Laundering and Securities Fraud for luring clients with whom he had established relationships over his 20-year career as a financial planner, and then diverting their monies for his own personal use, as well as to pay back earlier investors he had defrauded. Monroe was sentenced to up to 5 1/3 to 16 years in prison.

Tips for Investors

Based on the investment scams targeting New Yorkers that the Attorney General’s Office has investigated, Attorney General Schneiderman released tips that will help investors recognize and avoid potential scams and protect themselves from financial fraud:

  • Ask questions.  It is important to ask questions of anyone who is trying to sell you an investment product, and not to invest until you are fully satisfied that you understand what you are buying.  In particular, make sure that you understand all of the fees and commissions that you are being charged or that you may be charged in the future.  For example, in addition to upfront fees, there may be surrender fees should you need to withdraw your money.  In addition, make sure that you fully understand the risks associated with the investment.  Investing involves risk, and the higher the potential return, the greater the risks investors are typically taking.  Investments that purport to be “risk-free” or that “guarantee” large returns are often scams. 
  • Check registration.  Before investing, ask whether the financial professional is licensed with the appropriate authorities.  The Financial Industry Regulatory Authority (FINRA) maintains a website called BrokerCheck (brokercheck.finra.org) where you can look up the registration status, certifications, and employment history of brokers and investment advisory firms.  BrokerCheck also lists prior complaints and regulatory actions.  You can also call the Attorney General’s Investor Protection Bureau (212-416-8222) for further information about financial professionals.
  • Check references.  A legitimate financial professional will be happy to get you in contact with other clients.  Ask those other clients about their experience, including their ability to withdraw funds when needed.
  • Get a second opinion.  It is often a good idea to have someone else – such as an attorney, accountant, or trusted family member or friend – review an investment recommendation before you invest.  They may see a red flag that you miss.
  • Get it in writing.  Make sure that you are provided with all offering documents and prospectuses related to your investment.  Written documentation is not proof that an investment is legitimate, but you should not invest with a financial professional who refuses to put his or her promises in writing.  In addition, make sure that any written documentation that you receive includes a clear explanation of the fees and commissions associated with the investment.
  • Don’t be rushed.  A legitimate salesperson will not try to force your hand.  Legitimate financial products do not disappear overnight, and you should take the time you need to make a sound investment decision.  A salesperson who says that “you must act now” may be trying to hide something.

Attorney General Schneiderman reminds New Yorkers that in addition to being vigilant investors, they should also report suspected instances of fraud to his office.  Investors can learn more about how to file complaints by visiting www.ag.ny.gov or calling 1-800-771-7755.

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