Securities fraud is any deceptive practice in the stock orcommodities markets that violates securities laws and that frequently results in investor losses. Securities fraud encompasses a wide range of actions, includinginsider trading, stock manipulation, misstatements and other illegal acts. But the term also includes outright theft from investors – or embezzlement by stockbrokers.
What is embezzlement?
Embezzlementis the act of dishonestly withholding assets (with the intention ofstealing those assets) by one or more individuals that have been entrusted to hold the assets for some other purpose. For instance, afinancial advisorcan embezzle funds from investors or a person can embezzle funds from his or herspouse. Embezzlement ranges from being minor, involving only small amounts, to involving immense sums and sophisticated schemes. More often than not, embezzlement is performed in a premeditated and methodical manner with the intent to conceal the activities because they are being done without another’s knowledge or consent. Schemes often involve embezzling only a small proportion of a total fund an individual has or controls – in an attempt to minimize the risk of the detection. When successful, embezzlements can continue for years without detection, and only when a relatively large proportion of the funds are called upon for another use do the victims realize the funds are missing and they have been duped. Embezzlement is astatutory offense,and its typical elements are (1) the fraudulent (2)conversion (3) of theproperty(4) of another (5) by a person who has lawful possession of the property. The embezzler must willfully, and without claim of right or mistake, substantially interfere with someone’s rights in some tangible or intangible personal property, and the embezzler must have lawful possession of the property at the time of the fraudulent conversion – not merely custody of the property.
Embezzlement often involves falsification of records, which helps to make a scheme more detectable as opposed to transactions in cash which are more difficult to identify. In a recent embezzlement case, a Port St. Lucie securities broker, Paul Elvidge, embezzled more than $1.1 million from client investment accounts. Elvidge operated and managed Seacoast Investor Services, which was later bought by Cape Securities, as a brokerage and investment firm. From July 2010 to October 2012, while acting as a securities broker for Seacoast Investor and Cape Securities, Elvidge prepared fraudulent forms and forged account holders’ signatures. As a broker, Elvidge had access to clients’ brokerage accounts and was able to create records and direct wire transfers from these accounts. He used the stolen money, approximately $1,113,595, for personal and business expenses and to fund his personal day-trading activities. Elvidge, and embezzlers like him, are often successful for many years due to their skill in gaining the trust and confidence of investors who become reluctant to “test” the embezzler’s trustworthiness by withdrawing funds.
Securities fraud can be as straightforward as brokers and advisors outright stealing client money. Embezzlers put investor money in their own pockets and fudge the numbers to cover it up. Be sure you know your broker and are checking your investment records. If the numbers seem off, get a second opinion or sound the alarm to make sure your broker isn’t stealing from you.
The attorneys at ChapmanAlbin have helped hundreds of people who have been victims of Ponzi schemes and embezzlement. If your broker or advisor stole money from you, please contact us for a free consultation.
