Insider trading is the trading of a public company's stock or other securities based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information are illegal. This is because it is seen as unfair to other investors who do not have access to the information, as the investor with insider information could potentially make larger profits than a typical investor could make. The rules governing insider trading are complex and vary significantly from country to country. The extent of enforcement also varies from one country to another. The definition of insider in one jurisdiction can be broad and may cover not only insiders themselves but also any persons related to them, such as brokers, associates, and even family members. A person who becomes aware of non-public information and trades on that basis may be guilty of a crime.
Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements (pump), in order to sell the cheaply purchased stock at a higher price (dump). Once the operators of the scheme "dump" (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small-cap cryptocurrencies and very small corporations/companies, i.e. "microcaps".
Barry Jay Minkow is a former American businessman, pastor, and convicted felon. While still in high school, Minkow founded ZZZZ Best, which appeared to be an immensely successful carpet-cleaning and restoration company. However, it was actually a front to attract investment for a massive Ponzi scheme. ZZZZ Best collapsed in 1987, costing investors and lenders $100 million in one of the largest investment frauds ever perpetrated by a single person, as well as one of the largest accounting frauds in history. The scheme is often used as a case study of accounting fraud.
The Stock Exchange of Hong Kong is a stock exchange based in Hong Kong. As of the end of 2020, it had 2,538 listed companies with a combined market capitalization of HK$47 trillion. It is reported as the fastest growing stock exchange in Asia.
A binary option is a financial exotic option in which the payoff is either some fixed monetary amount or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays some fixed amount of cash if the option expires in-the-money while the latter pays the value of the underlying security. They are also called all-or-nothing options, digital options, and fixed return options (FROs).
Penny stocks are common shares of small public companies that trade for less than one dollar per share. The U.S. Securities and Exchange Commission (SEC) uses the term "Penny stock" to refer to a security, a financial instrument which represents a given financial value, issued by small public companies that trade at less than $5 per share. Penny stocks are priced over-the-counter, rather than on the trading floor. The term "penny stock" refers to shares that, prior to the SEC's classification, traded for "pennies on the dollar". In 1934, when the United States government passed the Securities Exchange Act to regulate any and all transactions of securities between parties which are "not the original issuer", the SEC at the time disclosed that equity securities which trade for less than $5 per share could not be listed on any national stock exchange or index.
In business, the term boiler room refers to an outbound call center selling questionable investments by telephone. It usually refers to a room where salespeople work using unfair, dishonest sales tactics, sometimes selling penny stocks or private placements or committing outright stock fraud. A common boiler room tactic is the use of falsified and bolstered information in combination with verified company-released information. The term is pejorative: it is often used to imply high-pressure sales tactics and, sometimes, poor working conditions.
CUC (Comp-U-Card) International Inc. was a membership-based consumer services conglomerate with travel, shopping, auto, dining, home improvement and financial services offered to more than 60 million customers worldwide based in Stamford, Connecticut, US, and founded in 1973 by Kirk Shelton and Walter Forbes. In 1998, it became involved in a Securities and Exchange Commission investigation into what, at the time, was the biggest accounting scandal in corporate history.
Front running, also known as tailgating, is the practice of entering into an equity (stock) trade, option, futures contract, derivative, or security-based swap to capitalize on advance, nonpublic knowledge of a large ("block") pending transaction that will influence the price of the underlying security. In essence, it means the practice of engaging in a personal or proprietary securities transaction in advance of a transaction in the same security for a client's account. Front running is considered a form of market manipulation in many markets. Cases typically involve individual brokers or brokerage firms trading stock in and out of undisclosed, unmonitored accounts of relatives or confederates. Institutional and individual investors may also commit a front running violation when they are privy to inside information. A front running firm either buys for its own account before filling customer buy orders that drive up the price, or sells for its own account before filling customer sell orders that drive down the price. Front running is prohibited since the front-runner profits come from nonpublic information, at the expense of its own customers, the block trade, or the public market.
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. The setups are generally made to result in monetary gain for the deceivers, and generally result in unfair monetary losses for the investors. They are generally violating securities laws.
The Great Stock Exchange Fraud of 1814 was a hoax or fraud centered on false information about the Napoleonic Wars, affecting the London Stock Exchange in 1814.
A U.S. Securities and Exchange Commission and U.S. Attorney probe of trading in the shares of ImClone Systems resulted in a widely publicized criminal case, which resulted in prison terms for businesswoman and television personality Martha Stewart, ImClone CEO Samuel D. Waksal and Stewart's broker at Merrill Lynch, Peter Bacanovic.
Marketwired was a press release distribution service headquartered in Toronto, Ontario, Canada. It was founded in 1993 and incorporated in the U.S. in 1999. In 2018, it was merged into GlobeNewswire.
Microcap stock fraud is a form of securities fraud involving stocks of "microcap" companies, generally defined in the United States as those with a market capitalization of under $250 million. Its prevalence has been estimated to run into the billions of dollars a year. Many microcap stocks are penny stocks, which the SEC defines as a security that trades at less than $5 per share, is not listed on a national exchange, and fails to meet other specific criteria.
In January 2008, the bank Société Générale lost approximately €4.9 billion closing out positions over three days of trading beginning January 21, 2008, a period in which the market was experiencing a large drop in equity indices. The bank states these positions were fraudulent transactions created by Jérôme Kerviel, a trader with the company. The police stated they lacked evidence to charge him with fraud and charged him with breach of trust and illegally accessing computers. Kerviel states his actions were known to his superiors and that the losses were caused by panic selling by the bank. Société Générale's own wrongs were later established by a French jurisdiction, which led the Cour de cassation to cancel the €4.9 billion sanction on Kerviel.
Frank DiPascali Jr. was an American fraudster and financier who was a key lieutenant of Bernie Madoff for three decades. He referred to himself as the company's "director of options trading" and as "chief financial officer". For a number of years, he played a key part in the daily operation of the Madoff investment scandal, later recounting how he helped manipulate billions of dollars in account statements so clients would believe that they were creating wealth for them.
International Investment Group (IIG) is an American financial institution that specializes in short-term trade finance and commercial finance with a focus on emerging markets. Through its affiliate IIG Capital it provides financing to small and medium-sized merchants, traders and processors with a need for supply chain financing.
An initial coin offering (ICO) or initial currency offering is a type of funding using cryptocurrencies. It is often a form of crowdfunding, although a private ICO which does not seek public investment is also possible. In an ICO, a quantity of cryptocurrency is sold in the form of "tokens" ("coins") to speculators or investors, in exchange for legal tender or other cryptocurrencies such as Bitcoin or Ether. The tokens are promoted as future functional units of currency if or when the ICO's funding goal is met and the project successfully launches.
Trevor Robert Milton is an American convicted felon, former businessman and the founder and former executive chairman and CEO of Nikola Corporation. In September 2020, Milton resigned from his position as executive chairman after the U.S. SEC and Department of Justice began investigating claims that Milton and Nikola committed securities fraud. In July 2021, Milton was indicted by federal prosecutors on three counts of securities fraud and wire fraud and released on $100 million bail. In June 2022, he was charged with another count of wire fraud. In October 2022, he was found guilty on three of the four counts, and received a 4 year prison sentence, a $1 million fine, and may be forced to forfeit part of his property holdings as a part of his sentence.
Mismarking in securities valuation takes place when the value that is assigned to securities does not reflect what the securities are actually worth, due to intentional fraudulent mispricing. Mismarking misleads investors and fund executives about how much the securities in a securities portfolio managed by a trader are worth, and thus misrepresents performance. When a trader engages in mismarking, it allows him to obtain a higher bonus from the financial firm for which he works, where his bonus is calculated by the performance of the securities portfolio that he is managing.
