The below interview of Emily A. Georgiades on Financial Crime was published in Gold Magazine, March 2019 edition.
Dealing with Financial Crime
Financial crime is a fast-growing concern nowadays, for both individuals and companies. Financial and investment firms, as well as their directors and officers, may be found liable for a client's financial loss due to negligence or fraudulent wrongdoing and regulatory violations. Emily A. Georgiades, advocate, in commercial, corporate & finance law at A.G.Paphitis & Co. LLC explains the various types of financial crime and the ways in which fraud victims can fight against it.
Who are the victims of fraud?
Anyone can be a victim of a financial crime. However, trends show that often it is certain types of groups that are targeted for financial crimes. Such groups can be identified as a certain age group, gender group, financial wealth class, race, culture, educational level or even by geographical location. For example, the elderly are often targeted for pension schemes.
What are some common types of fraud/financial crimes?
Although the list is non-exhaustive, some common types of financial crimes include:
- Mortgage fraud,
- Advance-fee schemes,
- Ponzi schemes (where one investors investment is used to pay back another investor's investment with interest),
- Stealing identifying information,
- "Pump-and-Dump" schemes (which is a type of market manipulation in which the seller of the shares buys enough shares to drive the share price up and then when others start to buy the shares the seller "dumps" or sell the shares causing the share price to plummet),
- credit-card theft,
- Pyramid schemes,
- Foreign-lottery schemes,
- Recommending unsuitable trades or trading techniques to traders who do not have a high-risk trading history (i.e. recommending margin trading to traders who never traded on margin before and have a conservative trading history),
- Obtaining investment sums for a project (such as a property development project) and not using the money for the purpose intended in the prospectus,
- Pension and trust fund fraud.
If a person/entity invests with a forex/broker dealer in Cyprus but lives in another jurisdiction (country), in which jurisdiction can the person/entity sue if they believe they are victims of a financial crime?
Generally, there is a choice. The lawsuit may be brought in the jurisdiction in which: 1) the alleged tort/crime occurred, 2) the plaintiff resides, or 3) where the defendant resides (or is headquartered in the event the party is a corporation). However, if the parties stipulated in their contract a jurisdiction beforehand in a dispute resolution clause then this clause governs.
I invested in a forex/broker dealer firm and lost money. Can I sue?
You may be able to sue for damages, but this depends on whether there is a cause of action. There is an inherent risk in investing and simply losing money does not automatically entitle you to sue for the losses. However, if there is some kind of foul-play then yes you may have a case.
Which red flags can indicate that I might be a victim of a financial crime?
Investments are inherently risky. Typically, there are no guarantees in life and so any scheme that gives guaranteed returns (particularly higher returns than anyone else and consistently high returns regardless of the financial market's volatility) is a red flag to look out for. Other red flags include claiming a false sense of urgency by claiming a limited supply, leading you to believe that other "more experienced investors" have already invested, and promising to make you an "expert" investor within days or weeks so you can begin investing in high-risk financial products.
What is the statute of limitation to sue if a financial crime has been committed against me?
Different jurisdictions have statute of limitations. In Cyprus, for example, the period of limitation shall not begin to run until the claimant or his agent or any person whose actions bind him has discovered the fraud or mistake, or could, with reasonable diligence, have discovered it, and is typically 6 years therefrom (Limitation of Conduct Rights Act 2012, 66 (I) / 2012, s. 6(1), s. 7(1) and s. 14(1)). There are also nuances in this legislation which may affect the start of the statute of limitations.
In New York, for example, the fraud begins to run on the date the plaintiff (the party bringing the lawsuit) is harmed by the fraudulent conduct. This is known as the accrual date. Under N.Y. CPLR 213, the plaintiff must file the lawsuit within six years of the accrual date. Alternatively, the plaintiff may file the lawsuit within two years from the time she/he discovered or should have discovered, the fraud. (New York Consolidated Civil Practice Laws and Rules §213(8)).
Because there are different statutes of limitations, it is important to consult an attorney immediately to ensure you are not time-barred from suing.
If you feel you have been a victim of a financial crime/fraud, you should contact an experienced securities lawyer to learn more about protecting your rights. At our law firm, we take a victim-centred approach and fight hard for our clients' rights. There is nothing to be embarrassed about being taken advantage of by criminals. Suing them to protect your rights sends a message that such behaviour towards the public is not tolerated under any circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.