Investment Fraud: When Investing Losses Aren’t Just from Risk

Courtney Werning talks about investment fraud and recovery options.

If you invest money anywhere, you hopefully know that investing comes with inherent risk. But not every investing loss happens because you made a bad decision or something happened in the market. Sometimes, you lose money because you made an investment you didn’t understand, you were pushed to invest in something that wasn’t a good choice, or you were denied the information you needed to make an informed decision. Fake investments aren’t the only kind of investment fraud out there. And these frauds can be devastating, especially to older investors.

See Investment Traps with Courtney Werning for a complete transcript of the Easy Prey podcast episode.

Courtney Werning has been a practicing attorney for thirteen years, and she’s spent her career representing investors with claims against financial institutions and personnel for investment fraud and misconduct. She is a named partner at Meyer Wilson Werning, an investor protection firm that has recovered over $350 million for defrauded investors. Courtney had no background in investment or securities before law school. But she quickly found her niche, and she loves going toe-to-toe with the Wall Street machine to protect regular investors.

Investment Scams, Fraud, and Misconduct

Just because you made an investment and lost money doesn’t necessarily mean there’s been any kind of misconduct. Sometimes a particular investment loses value or the whole market takes a downturn. But sometimes those losses are someone’s fault specifically. Whether that’s because the investment was a Ponzi scheme or outright fraud, or whether a broker or salesperson recommended something obviously wrong for you or misrepresented the facts, part of Courtney’s job is figuring out what went wrong with an investment and who is ultimately responsible.

People who invest … and they lose money doesn’t mean there’s misconduct automatically … but sometimes the investment losses are the result of negligence.
Courtney Werning

If someone is selling you an investment, they’re legally required to disclose all the material facts. If they don’t and you suffer damages (i.e. lose money), they can be held responsible. This is misrepresentation, sometimes called “omission of material facts.” If they haven’t given you the info you need to make an informed decision, they might have liability. Courtney hears this a lot with private securities. Many victims have said that if they knew the truth about it, they wouldn’t have invested. When someone omits important information, there are federal laws that protect investors.

Investment misconduct often has an element of fraud. Institutions or individuals might sell fraudulent investments, Ponzi schemes, or promissory note schemes. Courtney has also seen financial advisors commit outright theft. It’s happened a variety of times over her career. You would think that brokers generally don’t steal from their customers, but it does happen.

It’s Hard to Know What’s Recoverable

The challenge with misrepresentation is that it’s really hard to know what you don’t know. Investors often don’t know what they weren’t told until after they contact Courtney’s firm and the firm has looked into it. At that point, Courtney can tell them what the investment actually is. Often, the investors don’t know something is wrong until the investment fails – they lose money, or the income they were relying on suddenly stops. Then they panic and reach out to Courtney’s firm, but they don’t know what went wrong.

Courtney sometimes contrasts it with personal injury cases. If you’re sitting at a red light, you get hit, and you’re injured because of that, you know you can make a claim. You didn’t do anything, and now you’re hurt. It’s not always as clear with investment losses. There are people who have valid claims for investment recovery and don’t pursue it because they don’t know it’s an option.

If you’re sitting at a red light and you get hit and you’re injured, typically you know that there’s a claim to be had … it’s not always the same case with investment losses.
Courtney Werner

On the other side, Courtney sometimes gets calls from people who lost money, but she can’t help. Sometimes you have all the information, choose the best possible options, and something happens so you lose money anyway. If you knew all the risks and the advisor or broker didn’t do anything wrong, there’s nothing lawyers can do. It’s unfortunate, but that’s the risk that investing comes with. But that fact also makes it more challenging to help people who have legitimate claims for investment fraud and investor misconduct. It can be challenging to determine what’s normal risk and what has a valid claim for recovery.

Ponzi Schemes are Still Around

Many people assumed that after Bernie Madoff, Ponzi schemes wouldn’t exist anymore. But Courtney still sees them all the time. The main characteristic of a Ponzi scheme is that you put money into an investment and are getting returns, but the returns aren’t coming from actual investments or business activities – they’re coming from new investors. The scheme has to keep getting new investors to keep going, so it inevitably collapses.

I think people thought maybe after Bernie Madoff [Ponzi schemes] wouldn’t exist anymore, but they are everywhere.
Courtney Werning

Sometimes Ponzi schemes don’t start out that way. The recent case of GPB Capital Holdings. They started out with legitimate business operations. But eventually they descended into a fraud scheme. New investor money paid older investors – the defining characteristic of a Ponzi scheme. That happened down the line, though, after years of legitimate business. That makes it even harder to spot.

Some Ponzi schemes are still investment frauds from the outset, though. Courtney gets calls about them all the time, and has represented a lot of victims. Security regulators are still shutting down these schemes all the time. They’re still active and still out there. So it’s important to be aware.

High Returns and Long Games in Crypto Investment Fraud

Bernie Madoff famously said that he didn’t feel bad about what he’d done, because the returns he quoted were so obviously unrealistic that people should have known it’s a scam. And guaranteed returns or an extremely high target return is a major warning sign that something is wrong. Courtney looks at some of the returns these schemes promise and think they’re obviously too high to make sense. But to someone who doesn’t look at investments all day, it probably just looks great. And scammers deal in confidence. After all, “con man” is short for “confidence man.” They’re great at sounding like they know what they’re doing and making you feel comfortable.

A lot of times people invest a small amount first, start getting great returns, and then decide to put in more. More and more investment fraud is using this tendency and playing the long game. This is especially common in the crypto space. It’s no longer just you putting your money into a fake crypto exchange and it all disappearing. Now they create fake returns, and even encourage you to pull a little out to “confirm” it’s not a scam. This usually convinces people that it’s genuine.

These crypto investment and “pig butchering” scams are a long con. The scammers spend weeks or months building confidence to get at even more money. This is how people lose millions, or their entire life savings. Because you’ve seen returns and even taken some money out, you think it’s genuine and are reluctant to pull the plug.

Crypto Investment Fraud has Huge Losses

The numbers on losses for crypto-related schemes are huge. The 2025 FBI IC3 report recently came out, and it showed a 25% increase in losses from 2024. The reported number is now $11.4 billion. And since a lot of fraud doesn’t get reported, the actual number is almost certainly much higher. It’s something every investor should know is out there. The difficult part is knowing when it’s happening to you.

Crypto investment fraud plays a long game to make huge losses.

Courtney represents a lot of older investors, because they’re targeted more. Scammers go where the money is, and retirees are the people who’ve worked their whole lives to save ad have money to lose. Statistics show that while young investors are scammed more often, the dollar amount per scam is much lower. Older people lose much more to scams and fraud.

Scammers are going to go where the money is, and the money is in the hands of retirees in America.
Courtney Werning

A lot of retirees have no idea about how crypto works. Courtney thinks a lot of them get into it from fear of missing out – they don’t understand it, but they don’t want to miss an opportunity. Many of the stories of these scams are similar. The scammers have playbooks that they use. Especially with technology like using AI to replicate voices, videos, and even platforms, it’s easier than ever for scammers to create a fake investment platform that looks and feels like the real thing. All of these factors have led to huge increases in crypto investment fraud losses.

Protecting Aging Parents from Investment Fraud

Parents often hesitate to ask their children for help, both because it’s very vulnerable and they fear losing independence. And kids often aren’t sure at what point they should step in to help their parents. Everybody has their own personal circumstances you have to work through. But regulations have provided some tools that can help.

Most of the wealth of retirees is somewhere in the brokerage firm system. Financial advisors have a duty to safeguard customer assets, and FINRA and the SEC have given them tools to help. One new one is the ability to set a Trusted Contact on a portfolio. This is someone the broker or advisor can call if something looks weird. Getting a family member involved can help douse a scam, and the process works. For investors, it’s important to know that the trusted contact has no access, authority, or control over the account. It’s more like an emergency contact. You want to have someone for people to call if you have a medical emergency – this is essentially the same process for your financial accounts.

We want to make sure there’s somebody people can call if you collapse on the street … doing the same thing for your financial accounts is critically important.
Courtney Werning

If you’re worried about your aging parents, you could have the conversation about Trusted Contacts now. Their broker or financial advisor should also have had that conversation, too. They’re legally obligated to make reasonable efforts to get a Trusted Contact. (And this rule isn’t just for older people – every non-institutional retail investor should be making efforts to get a Trusted Contact on accounts.) Having this conversation on both fronts may help an aging parent decide to move forward with it.

What to Do if You Think You’ve Encountered Investment Fraud

The instant you realize that you may have been the victim of a scam or investment fraud, you should take steps to lock the account and contact law enforcement. Federal law enforcement or your state’s Division of Securities is sometimes a good place to start. You can also reach out to a lawyer like Courtney who can help you figure out what happened and if someone is legally responsible.

To a certain extent, it’s better to report it early. But the law allows a period of time for you to pursue a claim. You don’t have to worry about being out of luck if you didn’t report it within a month. The sooner you can get law enforcement involved, the more chance there is that they can stop the transfer and get some of your money back. But Courtney has worked on plenty of cases where mom or dad lost money and the kids don’t find out until settling their estate. There may be years between the actual investment fraud and contacting a lawyer, but that doesn’t mean a lawyer can’t help.

The important thing in looking at a timeline is the statute of limitations, which is based on what a lawyer would be filing and what rules apply. If you’ve lost money in the past couple of years, it’s probably still recoverable. But acting quickly and getting law enforcement involved is best – drop everything and do that first. There’s a very slim chance that they might be able to get it all back. And your chances of getting your money back in cases of crypto-based fraud are very low, but according to the FBI, it does happen. And it happens because people report it quickly.

Beware of Recovery Fraud

An abhorrent secondary fraud sometimes happens after the initial fraud. Scammers know that people tend to panic when they realize they’ve lost money to a scam. So then a different person, or potentially the same person, comes in and offers to get their money back, for a fee. This is a recovery scam. They might say they’re able to trace crypto, or even claim to be from the FBI. They’re taking advantage of human psychology to scam victims again.

One case that Courtney handled is one that she’ll never forget. An older man encountered someone who was “helping” him invest in crypto and thought he was investing in the legitimate exchange Kraken. Then someone claiming to be with the SEC reached out to him and said he was under investigation for insider trading and they would seize all his assets unless he paid a huge fee. Two days before the deadline to pay the “fee,” he took his own life because he saw no other way out. Courtney won that case in court because the brokerage firm did nothing about the clear signs of fraud and never notified his Trusted Contact.

There are plenty of experts out there who can trace crypto. The hard part is actually getting it back. Anyone reaching out to you or claiming guaranteed recovery is just another scammer. Reach out to an actual licensed lawyer through your state bar association to talk about your realistic chances of getting your money back – that’s your best bet. Recovery scams work because people panic. When you start thinking that you’ll do anything to get your money back, it leaves an opening for these scams.

Recovery scams work because people panic and they’re like, I’ll do anything to try to get myself out of this mess.
Courtney Werning

Warning Signs of Investment Fraud

A lot of investment fraud – especially the outright scam kind – originate with some kind of contact on social media. Be suspicious of any social media direct message. Scammers have impersonated one of the partners at Courtney’s firm on WhatsApp before as part of a recovery scam. They had to put out a message letting them know that no legitimate lawyer reaches out to people like that, they don’t make any guarantees, and they won’t ever ask for money.

Social media account takeovers are becoming a bigger thing, too. Local influencers get their social media hacked and suddenly start posting about making a lot of money off particular investments. Followers think it’s somebody they know and trust, but it’s really a scammer who stole their account. You can’t trust anything on the internet. You should be suspicious of everything on social media platforms generally because it’s just so prevalent.

You can’t trust everything you see on the internet. In fact, I trust nothing I see on the internet, typically.
Courtney Werning

Another major warning sign of investment fraud is secrecy. There shouldn’t be secrets in investing. Scammers often coach their victims to lie to financial advisors. If you’re pitched an investment that’s secret or exclusive in a way that you can’t tell anyone about it, steer clear. You should be able to get audited financials for any investment, and they should be able to explain it in a way you can understand. If they can’t do that or you can’t get the info you need, don’t invest.

The best way to get in touch with Courtney Werning or Meyer Wilson Werning is at investorclaims.com. They make a lot of information available, and they respond to the contact form within 12 hours.