Stock Options Fraud

Stock Options Fraud: This type of crime is despicable because the criminals involved usually have no motivation or provocation to defraud people other than pure greed.

The trading volume in the U.S. securities and commodities markets has grown dramatically over the past decade. This growth has led to an increase in fraud and misconduct that securities regulators estimate totals approximately $40 billion per year. Investment fraud can occur when a stockbroker misappropriates client funds, fails to execute a securities order, omits relevant facts about an investment, and/or engages in unauthorized trading practices known as “churning.” Churning is the excessive buying and selling in your account by your broker for the purpose of generating commissions.

Back dating of stock options is another practice that is currently being investigated by the FCC. Company executives back date stock options to a grant date when the stock was trading substantially lower to realize a larger profit for themselves on the day that the stock is actually purchased. More often than not, the executives retain this gain and their employees do not share in the ill gotten gains.

Employee stock options are a form of compensation in which an employee is given the opportunity to purchase shares of the company’s stock at a certain price. Usually, that price is lower than the actual market price of the shares. Class action litigation often occurs when a group of employees' unvested stock options are wrongfully cancelled when their company is sold by the parent corporation which granted them their options. Employees who are denied the rights granted to him/her by a Stock Option Agreement to accelerated vesting of unvested options following a company merger or sale have good cause to litigate. Additionally, employees who can prove they were terminated specifically to prevent them from vesting unvested employee stock options might also have a good case against their employer. A company is also engaging in fraud if it lies to its employees about the number of options they will be given, their exercise prices, their vesting schedules and/or their entitlement or lack of entitlement to employee stock options.

If you believe you have been a victim of any of these unfair trading practices you will need the assistance of a competent securities fraud investigator to help you uncover the evidence of shady dealings and build a winnable court case should you decide to sue. Contact ICS today for a free, no obligation consultation and ask what our specially trained securities investigators can do for you.

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