Investment Stats

This page is dedicated to sharing investment fraud statistics.  These statistics illustrate the magnitude of investment frauds that occur year after year in the United States and abroad.  We learn from these statistics that each and everyone of us need to be vigilant in taking every step available to us in the fight against fraud.  Wittenberg Law is here to help you.

October 19, 2011 – NASAA today reported a 51 percent increase in the number of enforcement actions by state securities regulators in 2010, which led to a nearly 200 percent increase in the amount of money ordered returned to investors.

December 6, 2010 – Attorney General Eric Holder announced today the results of Operation Broken Trust, a nationwide operation organized by the Financial Fraud Enforcement Task Force to target investment fraud. To date, the operation has involved enforcement actions against 310 criminal defendants and 189 civil defendants for fraud schemes that harmed more than 120,000 victims throughout the country. The operation’s criminal cases involved more than $8.3 billion in estimated losses and the civil cases involved estimated losses of more than $2.1 billion. Operation Broken Trust is the first national operation of its kind to target a broad array of investment fraud schemes that directly prey upon the investing public.

Extent of Financial Elder Abuse: Some key statistics pointing to the extent of financial elder abuse, or the potential for it, are:

Millions of Americans are victims of fraud each year. Many of those who fall prey to this crime are elderly; however, it is difficult to estimate the prevalence of elder fraud because cases are underreported and the definition of “elderly” varies from state to state. Even though national statistics on elder fraud do not exist, studies have shown that it is a problem in this country. This crime can have a significant impact on its victims because they are incapable of recovering financial losses; many are too old or frail to reenter the workforce. The emotional impact of elder fraud can be traumatic as well.

As of the end of fiscal year 2009, the FBI was investigating 1,510 cases of securities and commodities fraud and had already recorded 412 indictments/informations and 306 convictions. Additional notable accomplishments in fiscal year 2009 include: $8.1 billion in restitution orders; $63.4 million in recoveries; $12.8 million in fines; and $126 million in seizures. The securities and commodities fraud pending cases from fiscal year 2005 through fiscal year 2009 as follows: fiscal year 2005—1,139 cases; fiscal year 2006—1,165 cases; fiscal year 2007—1,217 cases; fiscal year 2008—1,210 cases; and fiscal year 2009— 1,510 cases.

Corporate Fraud remains the highest priority of the Financial Crimes Section and the FBI is committed to dealing with the significant crime problem. As of the end of Fiscal Year (FY) 2006, 490 Corporate Fraud cases are being pursued by FBI field offices throughout the U.S., 19 of which involve losses to public investors that individually exceed $1 billion.

Financial Crimes Report to the Public, Fiscal Year 2006,October 1, 2005 – September 20, 2006

The FBI pursues financial institution fraud involving $100,000 or more. The number of agents investigating corporate and other securities, commodities, and investment fraud cases has increased 47 percent, from 177 in 2001 to more than 250 today. Since 2007, there have been more than 1,700 pending corporate, securities, commodities, and investment fraud cases, an increase of 37 percent since 2001.

According to research conducted in several statewide surveys around the country, fraudulent telemarketing techniques have victimized 26 percent of the entire U.S. adult population at some point in their lives. Every year, these victims, 57 percent of whom are over the age of 50, lose a total of $40 billion to telemarketing fraud alone, according to a 2001 AARP study. The Federal Trade Commission estimates that 25 million Americans are victims of consumer fraud each year. Identity theft alone hits 10 million victims each year. Older investors are favorite targets of con artists who focus on investment fraud. Research shows that baby boomers and older investors are natural targets for a wide variety of unscrupulous marketing practices because they have had more time to accumulate significant assets for retirement. Pursuit of seniors’ “nest eggs” is one of the fastest growing consumer fraud issues today.

The U.S. Census Bureau reports that there are 37.3 million people 65 and older in the United States as of 2006. This represents 12 percent of the total population. A Baby Boomer (born between 1946 and 1964) turns 60 every 8 seconds. Between 2005 and 2006, this age group increased by 473,000 people. The U.S. population age 65 and over is expected to double in size within the next 25 years. By 2030, almost 1-out-of-5 Americans – some 72 million people- will be 65 years or older. By the year 2050, there will be 86.7 million people age 65 and older comprising 21 percent of the total population. The age group 85 and older is now the fastest growing segment of the U.S. population according to a recent study by the National Institute on Aging. Florida (17.9%), Pennsylvania (15.6%) and West Virginia (15.3%) are the “oldest” states, with the highest percentages of people age 65 and older.

More than 7.3 million older Americans—as many as one in five—have been taken advantage of through unreasonably high fees for financial services, an inappropriate investment or outright fraud, according to an elder investor fraud survey .

A 2008 Duke University study found that about 35 percent of 25 million people over age 71 in the United States have mild cognitive impairment or Alzheimer’s disease, making them vulnerable to financial exploitation, including investment fraud…  This is a growing problem. When all the boomers turn 65 in 2029, that’s 77 million people; we will have an age wave, if you will, that will … produce more people who are vulnerable to this form of financial abuse.

Other findings among those polled age 65 or older include:

According to the Canadian Anti-Fraud Call Centre (CAFCC), Canadian based mass marketing fraud operations gross over $500 million per year. In 2008, Canadian victims of fraudulent mass marketing operations based in Canada reported losses of $26.9 million to the CAFCC, an increase of over $2 million from 2007. It is estimated only 5% of actual complaints are reported. The top reported mass marketing schemes last year included: service, prize (e.g. sweepstakes/lottery and gift), purchase of merchandise, sale of merchandise, job, vacation, collection agency and charity.

According to a 2006 report by the North American Securities Administrators Association, investors lose $40 billion annually due to securities fraud (NASAA 2006). According to Glass Lewis & Co. (2005), investors lost nearly $900 billion in market capitalization from 1997 to2004 due to high profile frauds.

Investors in Enron lost a reported $60 billion (Vinod 2002), and trial testimony revealed that investors in WorldCom lost up to $200 billion (Rakoff 2003). The recent $50 billion fraud committed by Bernie Madoff indicates that investors continue to suffer serious consequences from financial statement fraud (Feiden and Zambito 2008). Though fraud impacts all investors in the capital markets, nonprofessional investors appear to absorb a disproportionate share of the losses.Larson (2008) finds that institutional investors own only 28.8% of firms known to havecommitted fraud.

Older people are major targets—they make up about 12 percent of the population, but 37 percent of telemarketing victims, according to one study. A telemarketing fraud artist told investigators, “It is an article of faith in this business to go after the old folks.”

The Australian Bureau of Statistics found that almost 6 million people are exposed to scams and frauds during any given year, with over 800,000 falling victim in some way.  The financial losses are of major concern – with almost $1 billion in losses – a good part of which will go out of the Australian economy.

The FBI just released its latest figures on real estate fraud, and for some parts of the country, the news isn’t very good! According to the FBI, Southern California has the most reports of mortgage fraud in the country, topping the closest region in the number of reported cases by over 35 percent. Since January 1 of this year, the FBI has received 2,293 reports of suspected fraud in the Los Angeles area alone, and 4,228 in the Southern California region.

The few existing studies of consumer fraud estimate that between 20 to 60 percent of adult Americans report being a victim or attempted victim of fraud. In 1998, the National Center on Elder Abuse estimated that nearly one third of all elder abuse cases involved financial exploitation. In 2000, the US Senate Special Committee on Aging reported $40 billion in losses to telemarketing fraud.

In 2004 fraud cost the UK economy in the region of £16 billion and is growing. This is equivalent to £650 per household per annum.