What is a Boiler Room?

Within the realm of investment and finance, a Boiler Room is a colloquialism given to investment endeavors that are deemed to operate in unlawful, unethical, and illegal manners. The term ‘Bucket Shop’ – which is classified as a type of Boiler Room – is defined as an investment firm or brokerage that conducts unlawful and illegal financial activity identifiable as securities fraud. While there does not exist a uniform procedure with regard to the process of a Boiler Room’s operation, standard Boiler Rooms retain similar qualities, which allow for their identification and potential criminal investigation:

Secrecy

Typically, a Boiler Room will operate in a clandestine manner, which contributes to the masking of nature of its true purpose and structure; while many legitimate businesses operate from recognizable, observable, and stabilized locations, a Boiler Room may operate from a temporary facility absent of contact information disbursed to clients or other individuals unaffiliated with its operation. Furthermore, the temporary nature of a Boiler Room allow for the quick dissolution of the endeavor, which is contributory the constant movement undertaken by a variety of Boiler Rooms

Solicitation

A Boiler Room will typically accumulate clients through the use of high-powered, forceful, and abrasive solicitation. Due to the clandestine nature of a Boiler Room operation, individuals employed at a Boiler Room will rarely – if ever – encounter clientele in a face-to-face, physical setting:

A Boiler Room will typically target investors will large amounts of reported investment capital; these investors are typically older in age – the respective age of these investors is largely believed to be a means of exploitation.

The Boiler Room solicitation process undertaken by many of the employees involves high-pressured sales tactic, which have been described as ‘bullying’ and ‘pushy’ by those on the receiving end of the solicitation.

The Boiler Room solicitation methodology typically involves telephone-based sales tactics, which allows for an elevated number of sales calls performed in lieu of face-to-face meetings; this methodology supports the ideology of a Boiler Room is two ways – it allows for sales calls to be quick and short, as well as allows for anonymity.

Boiler Room Legality

While every Boiler Room operation is not inherently illegal, the large majority of Boiler Rooms retain unlawful and ethical qualities; these qualifications involve anonymous sales of deceitful investment opportunities in a fraudulent manner – oftentimes, the use of misrepresentation with regard to both the performance, as well as the expected gains are prominent:

A Boiler Room operation will employ tactics that involve the promise of large returns, which are conveyed to take place within a short period of time; this tactic creates an attractive – albeit fraudulent – investment opportunity with regard to the recipient of solicitation.

The movement of a Boiler Room from location-to-location allows for an element of untraceably with regard to the investigation of the implicit criminal nature undertaken; Boiler Rooms may reside in locations for time periods ranging from weeks to years.

The investment capital accrued as a result of solicitation will typically be funneled to the facilitators of the Boiler Room; this is substantiated as a result of fallacious reporting of losses suffered as a result of a respective investment.

What is Medicare Fraud?

Medicare Fraud is defined as the act of knowingly, purposefully, and
deliberately misleading the Medicare claims office with the intent to swindle
or manipulate finances and funds disbursed as a result of an ailment;
fraudulent acts involving Medicare Fraud are typically
classified as involving misleading, deceitful, fake, and spurious measures
undertakenby an individual; such activity is recognized as the attempt to
garner personal profit or gain as result of fraudulent and deceitful
presentation of documentation and reporting assumed to be truthful and
accurate.

The submission of fraudulent Medicare insurance claims in order to
gain monies or funds is considered to be an illegal and an unethical criminal
activity.

Legal Jurisdiction of Medicare Fraud

Due to the fact the
provision of Medicare is a program sponsored by the Federal Government of the
United States, the applicable legal jurisdiction may span a single
jurisdiction. While Medicare Fraud is considered to be a criminal act
punishable to the fullest extent of the law, the involvement of the Federal
Government provides for an even heightened legal jurisdiction; this may result
in an indictment involving Medicare Fraud to be tried within the realm of both
Criminal Law, as well as Administrative Law:

The realm of Administrative Law  – with regard to Medicare Fraud –  is the legal specialty regulating the vast
expanse of laws, acts, ordinances, and legislation with regard to any and all
interactions in which the Federal Government of the United States engages its
citizens

The prosecution of Medicare Fraud within the scope of
Administrative Law, applicable charges can include the fraud,
misrepresentation, falsification of documents, forgery, and larceny – all
resulting from the unlawful duplication of documentation or illegal officiating
of government-mandated exchanges

Types of Medicare Fraud

Medicare Fraudcan be either exaggerated or fabricated in its respective
nature; the intent to defraud Federal Medicare facilities typically retains
both implicit and purposeful measures whose violation of the law exists in
concert with a violation of implied trust – the following are the 3 primary
examples of Medicare Fraud:

Phantom Billing

This type of Medicare Fraud involves the
fallacious and fraudulent reporting of procedures and medical activity
allegedly performed with regard to a Medicare claimed that was portrayed to be
legitimate; whether or not the procedures reported took place is immaterial –
falsifying any official and authorized reporting with regard to Medicare claims
is considered to be an example of Medicare Fraud in its fullest degree.

Deceptive Billing

In contrast to Phantom Billing, Medicare Fraud in the form of Deceptive Billing rarely
involves a procedure taking place; conversely, a patient involved in this
particular type of Medicare Fraud will typically sell – or auction – their
respective Medicare claim number in order to initially validate claims.
Subsequent to the initial claims, falsified and fraudulent additions to the
list of treatments are included with regard to the standard procedure of a
respective – albeit fraudulent – ailment

Up-coding
and Unbundling

This type of Medicare Fraud typically enacts the usage of codes that
exist in conjunction with the billing of expensive procedures. Upon the
presentation falsified Medicare claims through the usage of unbundled codes, a
Medicare claims office may be swindled into the provision of funds needed for
an expensive – albeit fraudulent – Medicare claim

What is Microcap Fraud?

Microcap Fraud is a type of securities fraud that involves investment activity and methodology rooted within stocks and investments that reside within the lower tier of the Market Capitalization classification. Microcap Fraud consists of the utilization of these types of investment options in order to commit fraudulent and criminal activity, which typically results in financial loss on the part of participatory investors. However, prior to more-fully understanding the concept of Microcap Fraud, the explication of applicable terminology surrounding this process is crucial.

What are Microcaps?

The term ‘Microcap Fraud’ is considered to be a colloquialism that refers to a shortened version of the word ‘Capitalization’ within Market Capitalization. The lower classification tiers of Market Capitalization are classified as companies – or investments – whose total market value does not exceed $50 million; as a result, these stocks are typically more inexpensive than stock options that exceed the classification of a Microcap.

In tandem to the typical price range for these Microcap stocks, the moniker ‘Penny Stocks’ has often been associated with Microcap Fraud; this moniker substantiates the decreased pricing with regard to a classification that the mass-purchase of these stocks is more widely-accessible than its larger ‘capped’ counterparts.

The Dangers of Microcaps

Due to the fact that microcaps – or penny stocks – are readily purchasable at decreased prices allows for the prospect of a single buy or entity gaining the opportunity to regulate the behavior of a particular microcap; the mismanagement of microcaps is classified as Microcap Fraud. Microcap Fraud can take place in a variety of methods:

Deregulation

This crime is particularly prevalent within cases in which the Securities and Exchanges Committee (SEC) has allowed for a microcap’s respective deregulation; as a result of this deregulation, the microcap company will be able to maintain agency over the commercial exchange of its stocks:

While this may be a productive and attractive feature for a company, there also exist a wide variety of criminal ramifications that can take place within the realm of Microcap Fraud; this can include the unfair manipulation of the stock resulting in the misrepresentation of its respective earnings.

Pump and Dump

A ‘Pump and Dump’ investment strategy is considered to be one of the most unethical and unlawful investment activities within the realm of Microcap Fraud; due the accessibility of the prospect to buy an individual microcap in large quantities, large-scale buying, selling, and exchange can allow for a single entity to control the behavior of a single stock without regard for other investors:

The ‘Pump’ aspect of this methodology typically involves an individual or entity amassing a large quantity of these microcaps – or penny stocks; individuals committing this nature of Microcap Fraud with ‘Pump’ money into the investment as they purchase a large quantity of shares.

The ‘Dump’ aspect of the process of this type of Microcap Fraud typically occurs as the multitude of microcaps are sold off in bulk; the mass-purchase of the particular Microcap projects the illusion that the stock underwent an increase in value – as the individual ‘Dumps’ that particular Microcap, the value of the stock declines just as quickly as it once rose.

What is a Ponzi Scheme?

Ponzi Schemeis a fraudulent operations in which investment capital is unlawfully distributed in a deceptive manner as a means to project the illusion of financial gains resulting from investment endeavors; typically, the investment capital of newer clients will be proportioned to existing clients with the hopes of instilling confidence in the operator’s investment acumen – the newer client’s will be deceived into believing that their investment capital was invested and subsequently lost as a result of market activity:

In reality, the money that was given in good faith – as an investment – was never invested at all; in contrast, the investment capital that was given was immediately funneled into the accounts of individuals with larger investment portfolios – this particular action provides a fallacious illustration of market gains as a result of investments.

Bernard Madoff, who was indicted in 2008, is considered to be responsible for the largest Ponzi Scheme to have taken place within the history of the United States.

The History of Ponzi Schemes

The first Ponzi Scheme was recorded as taking place in 1903 by an Italian immigrant named Charles Ponzi. The eponymously-names Ponzi Scheme consisted of Ponzi soliciting investors to provide him with money to invest within the replay coupon industry. The initial investors solicited by Ponzi granted him money towards this fraudulent endeavor; however, that investment capital was misappropriated by Ponzi himself.

As Ponzi recruited subsequent investors, he funneled the new investment capital towards the preexisting investors – the final stages of the Ponzi Scheme occurred as Ponzi utilized newer investment capital to substantiate returns to the original investors. As this illegal apportionment of funds took place, Ponzi amassed a large amount of wealth as his investors suffered financial losses due to this fraudulent activity.

The Ponzi Scheme Process

By definition, a Ponzi Scheme cannot – and will not – be able to endure a prolonged period of time; eventually, the funding for a Ponzi Scheme, which is reliant on new recruitment of investment capital, must eventually collapse.

However, individuals operating a Ponzi Scheme typically will operate a Ponzi Scheme with the intent of claiming the dissipation of their respective endeavor; the originator of a Ponzi Scheme will misrepresent this dissolution as a result of financial losses sustained by the investment market – in truth, the facilitator of a Ponzi Scheme will have embezzled a bulk of this capital masked by false claims of financial loss:

The facilitator of the Ponzi Scheme will seek to recruit investors with regard to a legitimate investment proposal; typically, this facilitator will attempt to solicit individuals with large sums available for investment prospects – the facilitator will accumulate a large sum of money through the embezzlement of this capital.

Once an amount of investment capital is attained by the facilitator of the Ponzi Scheme, that facilitator may continue to solicit individuals with smaller budgets for investments; the facilitator will use this capital to repay the initial investors – this swift repayment will be used to instill confidence the investment acumen of the facilitator.

A loss of funds will be reported back to the secondary investors, while the primary investors will continue to provide investment capital with hopes of earning more return; the facilitator will continue this process until funding is depleted.

What is a Junk Bond?

A Junk Bond is a type of a bond that is classified as per its Grade ranking with regard to both the inherent risk of repayment, as well as the stipulations implicit within the terms of the loan itself. The term Junk Bond receives this negative moniker due to the fact that there exists an implication in which the inherent improbability of repayment on the part of the borrower is considerably higher than its lower-risk counterparts.

Due to the inherent risk of default, a Junk Bond typically retains an interest rate that is considerably higher than those interest rates offered with standard bonds; a financial history on the borrower that reflects the default of loans, failure to repay, or bankruptcy will typically result in lowered bond grades – this serves to alert the owner of a bond that a presence of risk exists in conjunction with the bond itself.

What is a Bond?

In contrast to stocks, which are individual shares of a publically-traded company available for purchase on the commercial investment market, a bond is a loan that is given by an individual investor. Perhaps the most common types of bonds within the United States are United States Government Bonds; these bonds are loans indirectly granted to the Federal Government available for commercial purchase – as the bond matures, the latent interest grows:

The growth of an individual bond normally relies on the length of time that bond remains in one’s possession; redeeming a bond immediately after its purchase will normally lack any substantial financial gain, as there has not existed a sufficient amount of time provided for the development of interest

As the name suggests, a bond is a financial instrument that acts as a loan to a company or institution; the term bond signifies an implicit responsibility with regard to repayment – although repayment in regards to a Junk Bond is not impossible, the term ‘Junk Bond’ suggests the implicit risk of a failure of the borrow to successfully satisfy repayment

Types of Bonds

Bonds range from low-risk financial instruments to a ‘high-risk’ Junk Bond, bonds varying in nature may be offered for purchase – or individual investment – within the realm of trade and exchange markets. The identification – and subsequent classification – system employed by the investment market providing a setting for the sale of bonds – as well as Junk Bond – allows for investors to be made privy to any or all inherent risks latent within the nature of a bond itself:

1.       Bond Rating: AAA

          Bond Grading: Investment Bond

          Inherent Risk: Lowest Risk

2.       Bond Rating: AA              

          Bond Grading:Investment Bond

          Inherent Risk: Lower Risk

3.       Bond Rating: A

          Bond Grading:Investment Bond

          Inherent Risk: Lower Risk

4.       Bond Rating: BBB

          Bond Grading:Investment Bond

          Inherent Risk: Moderate Risk

5.       Bond Rating: BB to B

          Bond Grading: Junk Bond

          Inherent Risk: Great Risk

6.       Bond Rating: CCC to C

          Bond Grading:Junk Bond

          Inherent Risk: Greatest Risk

7.       Bond Rating: D

          Bond Grading:Junk Bond

          Inherent Risk: Bond Currently in Default

What is Corporate Finance?

What is Espionage?

Espionage, which oftentimes exist in tandem to its
colloquial classification known as ‘Spying’, is the criminal activity involving
the unlawful and unauthorized encroachment of one individual into the personal,
private space or domain belonging to another individual or entity; during this
encroachment, the individual accused of Espionage will typically – and
illegally – accumulate privileged information and date to which they are
unauthorized. In a large majority of Espionage cases, the victim of Espionage
is unaware that this unethical and illegal gathering of information is
occurring; typically, individuals will gain otherwise unauthorized access to
these restricted, private domains through tactics involving fraud, forgery, and
blatant misrepresentation. Although Espionage is a fairly generalized criminal
activity, the notion on Financial Espionage is not uncommon within the
setting(s) of both commercial and financial activity.

Types of Financial
Espionage

Financial Espionage can take place in a variety of methods;
in certain cases, this type of illegal encroachment can take place within a
physical, face-to-face setting – conversely, the advent of virtual technology
has allowed for Financial Espionage to take place remotely and anonymously:

Physical Financial Espionage

This type of Financial Espionage may occur in the event that
an individual is allowed to gain access to areas, domains, setting, and
information that is considered to be privileged; this may take place as a
result of that perpetrator being hired by a specific financial company while
under the employ – or contract – of a rival financial company. During the
fraudulent employ of the perpetrator of Financial Espionage, they may be
granted access to authorized financial records and reports; typically, this information
may be funneled back to the sponsors of the Financial Espionage for economic
gain

Virtual Financial Espionage

In accordance with the development of computer and
online-based technology, Financial Espionage taking place on a virtual level
has become increasingly prominent; upon the illegal and unlawful access of
financial records and reports belonging to individuals – while retaining the
classification of ‘privileged information’ may be accessed through a variety of
cyber-crimes employing electronic infiltration into data systems

Crimes Associated
with Financial Espionage

The classification of Financial Espionage is typically a
result of events or activities undertaken by the perpetrator of this crime
gaining unlawful access to information or data existing within the private –
and oftentimes restricted – domain belonging to another individual or entity;
subsequent the enacting of Financial Espionage, privileged financial
information, which varies in nature is obtained through fraudulent means. In addition,
subsequent to the attainment of this information, a wide range of criminal
activities can be associated with the fate of the unlawfully-attained
information:

Trespassing

This is classified as the physical act of unlawfully
encroaching on the property belonging to another individual in an unauthorized
manner; in certain cases, individuals accused of a variety of Espionage charges
have been subsequently accused of trespassing in order to
illicitly collect private and personal information

Forgery

Upon fraudulently presenting documentation in order to
obtain access to privileged information or data – albeit through illegality,
the presentation of unauthorized, duplicated documentation manufactured in
order to deceitfully illustrate authentic credentials