What is investment fraud (definition & sentencing guidelines)?

Here, we take a closer look at investment fraud, focusing on the legal definition and sentencing guidelines that apply to those who are found guilty.

It’s important to note that pieces such as this are not intended to replace specialised legal advice from a criminal defence solicitor. No amount of research online will be enough to adequately prepare you to represent yourself in a court of law, and it’s imperative that you seek assistance from a qualified, experienced criminal defence solicitor to help you work on your case. 

 

Legal definition of fraud

Investment fraud cases will generally be dealt with under the Fraud Act 2006. The act provides a very general definition of fraud, which can then be applied to a wide range of different situations. 

According to the act, fraud is committed when someone intentionally makes a false representation, with the goal of either causing personal gain or loss to another. 

The important element here is intention; for it to be considered an act of fraud, the representation must have been intentionally dishonest, and the end result of gain or loss must also have been the intended result.

Conspiracy to defraud

In most fraud cases, intention is so important that even if the planned act of fraud is not carried out, if intent can be proven, the defendant can be found guilty under conspiracy charges. This can result in a similarly serious sentence compared to if the act were actually carried out.

 

Investment fraud

Investment fraud refers to a range of different fraudulent activities that are covered under the Fraud Act 2006. These include:

Pyramid schemes

Pyramid schemes, or pyramid fraud, is a kind of investment fraud whereby existing investors are persuaded to bring new investors into the scheme for a percentage of the capital that is brought in as a result. In many cases, there won’t be an actual service or product that’s being invested in – new ‘investments’ are just funnelled up to the founders of the scheme.

Share ramping

Share ramping refers to a process whereby share prices in a certain company are subject to artificial and illegal manipulation. This could be a result of rumours being spread by the company itself which change the value of the share, to bring about favourable conditions to then buy or sell shares.

Boiler room fraud

Boiler room fraud is the kind of fraud depicted in The Wolf of Wall Street. It consists of a sales centre which sells stocks that are hardly worth anything – or penny stocks – using a range of fraudulent tactics. 

The victim will then be left with stock that has practically no value, without having been informed at all about the potential risks of their investment. These kinds of frauds typically target vulnerable individuals. 

 

Advance fee fraud

In advance fee frauds, a form of mass communication will be circulated (typically by email) asking for an advance payment in return for shares or money at a later date. This can be carried out using a wide range of different tactics, however, the end result will always be that the promised gain for the victim never actually materialises.

 

Sentencing guidelines

Investment fraud is a serious criminal offence, and if you’re convicted, you may face a serious custodial sentence. Those charged and found guilty under the Fraud Act 2006 face a potential prison sentence of up to 10 years. 

While this will only apply in the most serious of cases, it’s very possible that you receive a lesser custodial sentence of around 4 to 5 years, depending on the nature of the act in question.

Impacting factors

With investment fraud, two main factors will be considered when assessing an appropriate sentence – harm and culpability.

Culpability

As most (but not all) acts of investment fraud require ongoing effort and a wide range of different victims, it’s likely that the ringleaders will be placed in a bracket of higher culpability. This will especially be the case where victims are chosen due to their vulnerability.

Defendants who were involved through coercion, were not motivated by personal gain, and who had limited awareness of the severity of their actions will likely be placed in a bracket of lesser culpability, and receive a lower sentence as a result.

Harm

With most fraud cases, harm is assessed by considering how much financial damage was caused. At the top of the scale, acts that involve the gain or loss of over £500,000 will be considered category 1 offences. At the other end of the scale, cases involving less than £5000 (starting at £2500) will be considered category 5 offences.

Where no harm is actually caused, but the risk of harm is present as a result of a planned fraud, the category of harm is generally moved down one bracket.

 

Seeking legal assistance

Investment fraud is an incredibly serious criminal offence to be accused of, and it’s imperative that you seek appropriate legal counsel. The help that you receive from your criminal defence solicitors early on in the process can have a significant impact on the end result, limiting further harm while giving you more time to work on your legal defence. Your legal team will be able to:

• Provide you with advice both before and during any interviews under caution you are required to attend
• Help you to develop a legal defence, arranging for your representation in court by a barrister if necessary
• Ensure that you are treated fairly by the criminal justice system at all times
• Help to guide you through the appeals process, should you and your solicitors be unsatisfied with the end result.

There’s never any harm in reaching out for advice sooner rather than later. Make sure that you cover your back, no matter whether you believe you’re innocent or guilty.