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Using leveraged money to invest in ETFs and other stocks can be ruinous for the average individual investor who is not careful.
The Securities and Exchange Commission today unveiled new charges against five unregistered brokers in connection with a $1.2 billion Ponzi scheme that came to light late last year.
The five individuals and their companies sold more than $243 million in unregistered securities to more than 1,600 individual investors, according to the SEC.
The individuals allegedly promoted the firm’s “safe and secure” investments at seminars, a Florida university class, in newspaper ads and on the radio.
The problem: The brokers were not allowed to sell securities and were not registered as broker-dealers, the regulator said.
That did not stop them from picking up millions of dollars in unlawful commissions, the SEC said.
The investors have yet to have their principal returned and are not receiving monthly interest payments, since the firm these professionals worked for filed for bankruptcy.
In a Ponzi scheme, the perpetrator generally takes money from one set of investors to pay off others, often earlier investors, or simply diverts the proceeds for private gain.
The case is a cautionary tale.
“The frightening truth about fraud is scammers scam and liars lie,” said Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority, which regulates brokerage firms.
Here are the precautions you should take to protect yourself from become a victim, according to the regulators whose job it is to catch these scams.
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