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Can unhappy investors accuse your company of fraud?

On Behalf of | Oct 29, 2020 | Criminal law

There is always a degree of risk in investment, which is one of the reasons why investors expect returns when they give money to a business or to fund an idea. They have taken a risk by giving their capital to someone else and now expect to be repaid for that risk. The company repays their faith by paying dividends, returning the investment with interest or giving the investor a partial stake in the company, such as shares of stock.

Sometimes, a business venture or concept that people, funds, or banks invest in fail despite the best efforts of everyone involved. When that happens, investors will usually lose the money that they invested in the company or concept. Even if the business liquidates its assets, creditors have priority over investors in many cases.

Sometimes, those unhappy investors may try to bring a claim against the owner of the business or the person who convinced them to invest. Such claims often involve allegations of fraud. When could you be at risk of fraud accusations from investors?

Did you exaggerate or manipulate the figures for the business?

When you seek investment capital, whether from private individuals or financial institutions, you have a legal and moral obligation to provide accurate information to those parties. After all, how can someone make an informed decision about the risk involved in an investment if they have inaccurate or misleading data?

Showing income projections not based on current market research, not disclosing known liabilities or outright lying about the assets and potential of a business or an idea could all potentially constitute fraud and lead to criminal charges, as well as lawsuits by investors.

Fraud charges could mean federal incarceration

Even if the business was in one set location, you may not face state charges. Many times, white-collar crimes wind up being federal offenses. If there were interstate transfers or federal institutions involved in the situation, a person accused of business fraud or defrauding investors could face federal charges instead of state charges.

If investors or business partners have begun to claim that they were victims of fraud or if you are aware that you are under investigation for fraud, getting advice about the criminal consequences of a business failure can help you make better decisions and protect yourself as the situation unfolds.