Promissory Note Fraud Explained by a NY Investment Manager
Promissory notes refer simply to a promise to pay. They are a form of debt like a loan or an IOU. Companies and individuals may sign promissory notes in exchange for borrowed funds. On a small scale, these notes are usually legitimate investments and simply outline a legal relationship between a creditor and a debtor. In some circumstances, however, a promissory note is fraudulent and a promissory note scam is operated in order to improperly obtain investor funds.
Promissory note fraud is a crime and those involved in a scam can face a lengthy prison sentence if convicted of fraud offenses. At Bukh Law Firm, PLLC, our experienced New York City investment fraud lawyers provide legal representation to help defendants who have been accused of engaging in international promissory note fraud or fraud within the United States. Give us a call to learn how our white collar crime lawyers can help you fight all legal proceedings against you to protect your finances and avoid imprisonment.
What is Promissory Note Fraud?
When a valid promissory note is issued, a company raises money from investors with an agreement to pay a designated rate of return on the investment. The company promises to pay the money back within a certain time.
A promissory note scam, on the other hand, involves persuading life insurance agents and other financial advisors to sell promissory notes. Typically, the scam involves targeting people who do not have a license to sell securities. Those selling the notes rely on the information that is given to them about the company IOUs. Those who are targeted to sell the notes are told to market them to investors by promising a high fixed-rate of return and a low level of risk. They are also told to describe them as “guaranteed” or “insured.”
Investors, enticed by promises that they will receive anywhere from 15 to 20 percent or more on their money, purchase the promissory notes. Because the notes are sold by insurance agents and financial advisors that clients trust, they may not ask a lot of questions about the investments.
Those perpetrating the scam pay commissions to sellers from the money collected, but embezzle the rest of the funds in some cases. In other situations, the promissory note fraud takes the form of a Ponzi investment scheme and the old investors are paid with the proceeds from new investors.
International Promissory Note Fraud
International promissory note fraud is similar to other types of promissory note fraud. However, those organizing the scam may advertise the promissory notes as involving a foreign entity and/or being backed by the treasury or other government authorities.
In some cases, international promissory note fraud schemes target U.S. clients but participants in the scam are located outside of the United States. The U.S. government may conduct fraud investigations of individuals living in foreign countries. Extradition is possible with criminal charges for individuals living in countries with an extradition treaty with the United States, or individuals could be arrested for their part in the fraud if they visit the country.
Legal Action for Promissory Note Fraud
Promissory note fraud can result in numerous federal and state charges. A defendant could be charged with larceny under NY Penal Code Article 155 for embezzling client funds. The Martin Act provides broad discretion to authorities in New York to take legal action and conduct investigations in cases of suspected securities fraud. Fraud related to the sale of securities can also result in federal criminal charges under 18 U.S. Code Section 1348 as well as legal action under 10B-5 of the Securities Exchange Act of 1934.
Because the life insurers and investment advisors typically also receive marketing information through the mail or wire services, defendants involved in promissory note fraud can be charged with wire or mail fraud under 18 U.S. Code Section 1341 or Section 1343. Each of these different offenses could carry a maximum penalty of between 20 and 30 years incarceration, depending upon whether the scheme was likely to result in a financial institution being defrauded.
Defendants may be indicted for multiple charges, as well as facing civil actions and regulatory enforcement by the Securities and Exchange Commission.
How a New York City Investment Fraud Lawyer Can Help With Promissory Note Fraud
When you are accused of promissory note fraud, it is time to talk to a lawyer about how you can avoid having your accounts frozen, your assets seized, and your freedom taken away. Bukh Law Firm, PLLC has defended many clients accused of promissory note fraud and we can provide you with aggressive legal representation by New York City investment fraud lawyers with experience.
Give us a call today to schedule a consultation and learn more.
