Stock fraud is a common white-collar crime, that sees stockbrokers advising their clients to invest in products that may not be in their best interest or diametrically opposed to stated risk tolerances. Stockbroker fraud can happen when a broker recommends certain investments to his clients just to earn a higher commission for himself.
All these scenarios represent the failure of a stockbroker's fiduciary duty to his client, which holds the client's best interest as the highest standard.
It is also the law—and when investors get burned, stockbroker arbitration is one means of pursing justice and compensation.
The Honolulu Star-Advertiser (01/06/12) reports that David E. Ruskjer was convicted in September. The Hawaiian moneyman admitted to his victims that he indeed was not a licensed stockbroker and thus did not have authority to invest on their behalf by traditional means. However, Ruskjer assured a collection of Kauai residents that in exchange for depositing money into his bank account, Ruskjer would issue them promissory notes guaranteeing monthly returns up to five percent.
In reality, Ruskjer was running a Ponzi scheme, using money from new investors to pay off old investors. In total, Ruskjer convinced 140 people to give him about $16 million.
It wasn't stockbroker investment fraud in the traditional sense, as Ruskjer wasn't a stockbroker. Nonetheless, just because he lacked that qualification did not excuse him from responsibility in the eyes of the law.
On January 5, US District Court Judge Helen Gillmor sentenced the 60-year-old wannabe stockbroker to 10 years in prison and ordered the man to repay his victims a total of $11,586,334.
There is some doubt victims will see all their money, however. At the time of Ruskjer's arrest in 2008, authorities seized just over $4 million from various accounts controlled by Ruskjer, together with a Koloa condo he bought with $520,000 of investor funds. The condo is worth less than half that on today's market.
A stockbroker fraud lawyer told the Star-Advertiser that about half of the group of 140 victims—71, to be exact—submitted written statements that accompanied the court's confidential pre-sentence report.
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Thus, the stockbroker investment fraud case that wasn't—as the defendant wasn't a licensed stockbroker—nonetheless landed the perpetrator in prison for mail and wire fraud, money laundering and structuring cash transaction in an effort to avoid reporting requirements.
The combination of greedy financial wizards capable of pulling the wool over a victim's eyes, and the investor's willingness to entrust funds to a stranger in exchange for a better return, creates a perfect storm that almost always drowns the investor in its wake, unless the investor fights back with a stockbroker arbitration lawsuit. Your future may be at stake.