Investment fraud occurs when people are misled into putting money into opportunities that are not what they seem.
It can involve false or exaggerated claims about returns, non-existent products, or schemes designed to take money rather than invest it. Allegations in this area often involve detailed financial evidence and complex arrangements.
Understanding how investment fraud is defined can be important when responding to allegations or investigations.
What Counts as Investment Fraud?
No single offence is called “investment fraud”. Allegations are usually brought under one or more of the following:
- Fraud by false representation under section 2 of the Fraud Act 2006: dishonestly making a false or misleading representation to make a gain or cause a loss.
- Misleading statements under section 89 of the Financial Services Act 2012: knowingly or recklessly making false or misleading statements, or dishonestly concealing facts, to persuade someone to invest.
- Breaching the general prohibition under section 19 of the Financial Services and Markets Act 2000: carrying on a regulated financial activity without being authorised.
Common Types of Investment Fraud
Investment fraud allegations can arise from many different arrangements, including:
- Ponzi schemes, where earlier investors are paid with money from new investors
- Boiler room operations selling shares or products through high pressure sales calls
- Land banking and other property investment schemes
- Cryptocurrency and foreign exchange trading schemes
- Unregulated investments sold with exaggerated or guaranteed returns
Who Investigates Investment Fraud?
Investment fraud can be investigated by the police, the Serious Fraud Office and the Financial Conduct Authority, which publishes guidance on spotting investment scams. Investigations can involve interviews under caution, production orders for bank records, searches and restraint orders freezing assets.
The Evidence in Investment Fraud Cases
These cases are usually document heavy. Investigators will look at marketing materials, investor communications, company accounts and bank records, often tracing where investors’ money went. A central question is whether there was dishonesty. A genuine business that failed, or an investment that simply performed badly, is not the same as fraud, and the evidence needs to be examined carefully to show the difference.
Possible Penalties
Fraud under the Fraud Act 2006 carries a maximum sentence of 10 years in prison. Following a conviction, prosecutors may also begin confiscation proceedings to recover money said to have come from the offending, which can involve significant sums.
Why Early Legal Advice Matters
Investment fraud investigations can run for months or years, and decisions made early on can shape the outcome. Specialist advice helps you understand the allegations, prepare for interview and make sure the financial evidence is properly tested.
Learn more about our fraud defence services and how we support clients facing investigations and allegations.
