An investment is made to generate positive returns. A desire for profitability may downplay the possibility of losses. Risk taking and financial gains are generally inter connected. As such, investors can be lured into strategies that contain excessive risk by a disguise of negative consequences. The risk associated with such investments reverts the ownership of risk into the sole domain of the investor. Investment fraud comes in different forms and has a variety of victims.
The financial services industry has legitimate professionals and illicit actors. Both type of players can make mistakes that lead to heavy losses. Sometimes these losses are the result of fraud. In case of fraud, recovery actions have a distinct character from traditional investment risk. Group claims and alternative class actions can force a fraudster to settle with victims. Also, joint actions of civil and public parties can punish wrongdoers whilst ensuring that illegally obtained assets under control of the fraudster are returned to victims.
Investment fraud and financial crime disrupts society and leads to public conflict. The emotional impact fraud has on victims is not to be underestimated. Therefore, a combination of investor relief and advanced punishment of abuse maintains public confidence. Victims of fraud need to understand that civil action and public interference have different triggers and objectives. The result is that a combination of both advances the recovery potential.
Even though contract parties are responsible for their own research and due diligence, investment fraud can trigger criminal proceedings. Depending on the jurisdiction, bank fraud may allow for public intervention. However, due to the burden of proof in criminal cases, public authorities can also impose civil claims on wrongdoers and send an appropriate message to society that irresponsible behavior cannot be tolerated.