Glossary

Ponzi Schemes - In a Ponzi scheme, returns to earlier investors are paid using the capital from new investors, rather than from legitimate profits. This unsustainable model ultimately collapses when it becomes difficult to recruit new participants.

Pump and Dump - Fraudsters artificially inflate the price of a stock by spreading false or misleading information (the "pump"). Once the price rises, they sell off their shares at a profit (the "dump"), leaving other investors with devalued stocks.

Churning - brokers engage in churning by excessively buying and selling securities in a client's account to generate commissions, regardless of the client's best interests.

Insider Trading - Individuals with access to non-public, material information about a company may trade its securities before that information is disclosed, gaining an unfair advantage over other investors.

False Advertising and Misrepresentation - Companies may exaggerate their financial health, misstate revenue, or fail to disclose significant risks to entice investors, ultimately leading to financial losses.

Embezzlement - Employees or executives may misappropriate company funds for personal gain, leading to financial instability for the organization and its investors.

Pyramid Schemes - Similar to Ponzi schemes, pyramid schemes rely on recruiting new members to generate profits. They collapse when recruitment slows, leaving many participants with losses.

Forgery and Falsification - Individuals may forge signatures or falsify documents to mislead investors or financial institutions, often resulting in significant financial losses.