Hedge funds have become an increasingly popular investment vehicle in the last decade, and many people turn to hedge funds believing that they are a “safe” way to earn high returns. Contrary to what you may have been told, hedge funds can be extremely risky and are not suitable for all investors.
Unfortunately, some unscrupulous financial professionals may choose to make misleading statements or fail to fully explain the hedge fund’s risks to their clients—instead choosing to line their own pockets at the investor’s expense. Stockbroker fraud related to hedge funds is increasingly common, and—as investment fraud attorneys who have spoken with many fraud victims—we encourage you to learn more about hedge fund fraud so you can avoid it.
What Is a Hedge Fund?
The term “hedge fund” describes a private investment partnership that is minimally regulated and may invest in many different types of investments, including illiquid and speculative investments. Investors invest in the hedge fund, and the hedge fund then puts investor cash into the investments it chooses. Hedge fund managers generally receive a percentage of the returns, which—at least in theory—motivates the hedge fund manager to make wise investment decisions.
Why Is Hedge Fund Fraud So Common?
Hedge fund promoters often entice potential investors with optimistic claims of fast, sizeable returns. Unfortunately, the lack of oversight associated with these funds often allows promoters to make claims over and above the returns they can actually deliver.
Not all hedge funds are investment scams—in fact, most hedge funds are perfectly legitimate investment vehicles for some sophisticated and risk-tolerant investors. Unfortunately, the lack of regulatory oversight, the high-risk investments that are often in play, and the safety of the hedge fund manager’s compensation mean that investors could be vulnerable.
Hedge funds are not required to register with the SEC. As such, they are not subject to the same mandatory reporting rules as other investment funds. This lack of oversight, coupled with the significant first investments that investors are typically required to make in order to participate in a hedge fund, opens the door for fund managers to easily take advantage of investors.
Hedge fund fraud comes in many different colors. It may take the form of misleading statements that cause investors to falsely believe the hedge fund is suitable for their needs, false information about the hedge fund’s performance, or could even be the cover for a classic investment scam.
Lack of Oversight & Significant Financial Losses
While not subject to mandated reporting rules, hedge fund managers and operators are still held to the same fiduciary duties as other brokers and can still be held liable for investment fraud. With over 50 years of combined legal experience, and having successfully represented over 800 individual and institutional investors, Meyer Wilson has the expertise, experience, and resources necessary to review, investigate, and aggressively pursue your hedge fund fraud claim.
We have won hundreds of millions of dollars in losses for clients nationwide, including in cities such as Columbus, Charlotte, San Diego, Los Angeles, Dallas, and Miami.
For assistance with your hedge fund fraud claim, call us or complete our online form for a free case evaluation.
You can learn more about hedge funds by watching our helpful video: