How to Identify and Protect Yourself From Investment Fraud in California? 2025

Investing is an inherently risky business, and it’s not uncommon to experience ups and downs as the market shifts and unexpected trends take hold. That said, investors can also run the risk of financial and investment loss due to fraud or misconduct from their broker or financial advisor. It’s important to understand how to identify and protect yourself from investment fraud in California, so you can protect yourself and your assets from these corrupt individuals.

Investment fraud can take on many forms, and most of them are quite convoluted. This can make identifying investment fraud and proving that you were a victim challenging, which can leave you in a difficult situation. Working with a California investment fraud lawyer can help you better understand potentially fraudulent behaviors and teach you how to protect yourself from them.

Signs of Investment Fraud

Often, it’s easy to chalk up your poor performance in the investment market to the volatility of the market or your own mistakes. However, it’s possible your misfortune was due to fraudulent behavior or misconduct from your broker or financial advisor all along. There are plenty of signs to be on the lookout for when it comes to identifying investment fraud, including:

• A considerable number of broker-recommended investments losing money
• Large losses in your portfolio when the market is performing well
• Missing investment statements or mistakes on investment records
• Unauthorized transactions or missing money on your investment records
• Your broker becomes difficult to reach or refuses to communicate with you
• Your broker is pressuring you to invest large amounts of money quickly
• Your broker recommends investments that don’t align with your goals

If you have a broker or financial advisor handling your investment accounts for you, it’s still important to be aware of the actions they are taking on a regular basis. While most financial professionals behave ethically, it’s in your best interest to have working knowledge of their activities to ensure they continue to make decisions that align with your investment goals.

Common Types of Investment Fraud in California

There seems to be an endless list of investment fraud activities and schemes people can introduce to investors to try to steal their money and other assets. In fact, California received the highest number of complaints and reported losses of over $2 billion from Internet Crime Reports in 2023.
By learning about some of the most common, you can better protect yourself from fraudulent behavior down the road. Here are some common types of investment fraud in California:

• Affinity fraud. This type of investment scam targets people who are a part of an easily identifiable group. This includes elderly people, professional associations, or religious or ethnic communities.
• Churning. This trading “strategy” is also known as excessive trading and refers to a broker or advisor making an unnecessarily large number of trades on behalf of an investor simply to increase their own commissions on the trades instead of to help the investor. These trades rarely align with the investor’s goals and usually lose them money.
• Cryptocurrency schemes. There are countless cryptocurrency scams in circulation these days, including fake ICOs, fraudulent exchanges, and pump and dump schemes.
• Ponzi schemes. These types of schemes rely on new investors to buy into the investment, which then pays the investors that came before them, and so on and so forth. Typically, the manager of the scheme steals the funds for themselves and uses investor money to continue paying other investors until the money runs out and the scheme falls apart.
• Pyramid schemes. These schemes function similarly to Ponzi schemes in that they rely on the recruitment of new investors to keep them going. However, the people at the top of the investor list must continue to recruit new people instead of leaving it to new investors. Pyramid schemes often fall apart in the same manner as Ponzi schemes, too.

The most frequently reported crime as of 2023 was phishing schemes, including unsolicited emails, text messages, and telephone calls. Over 298,000 complaints were filed in California with the biggest impacts in San Francisco, Santa Clara County, and Alameda County.

How to Protect Yourself From Investment Fraud in California

Even if you don’t fully understand everything about the investment market, it’s entirely possible to protect yourself from fraudulent activities and ensure your investments are safe. Staying informed and leading with caution can help you avoid investment fraud no matter the situation. Some easy tips you can follow include:

• Avoiding pushy brokers or financial advisors
• Being skeptical of investments that promise high returns
• Documenting all investment details
• Thoroughly researching an investment before committing
• Verifying credentials of the party offering the investment

Before moving forward with an investment in California, you can do a quick check on the product, broker, salesperson, or advisor through the Department of Financial Protection & Innovation.

FAQs About California Investment Fraud Law

What Is the Sentence for Investment Fraud in California?

If you are successful in proving investment fraud against an individual, entity, or third party, they can face a variety of penalties under both state and federal law. These penalties can include having their license suspended or revoked, paying fines, serving jail time, and having to pay damages back to you for your financial losses.

What Is the Statute of Limitations to File for Investment Fraud in California?

Under California law, you are able to file an investment fraud claim one to five years after the alleged fraud has occurred depending on the unique circumstances of your care. For example, you can file for securities fraud within five years of the act or within two years from the discovery of the fraudulent activity.

What Are Four Common Types of Investment Fraud Schemes in California?

Investment fraud can take on many different forms, and it’s important to be able to identify potential signs of schemes being pulled with your investment accounts. There are a number of common investment fraud schemes that unethical brokers and advisors can partake in, including cryptocurrency scams, Ponzi schemes, pump and dump scams, and pyramid schemes.

Who Are Common Targets for Investment Fraud in California?

The truth of the matter is anyone can be a victim of investment fraud. That said, unethical parties looking to make money off investors do tend to have specific targets to increase their chance of success. The most common people targeted for fraud schemes and other types of investment fraud include elderly people, immigrants, low-income individuals, retirees, and small business owners.

Contact a California Investment Fraud Attorney to Learn More and Discuss Your Options

Are you ready to take action against an investment fraud case in California? Our skilled legal team at Rosenberger + Kawabata is here to help. Our attorneys have hands-on experience dealing with all types of investment fraud and financial misconduct, and we know what it takes to hold the right parties accountable, so you can recover the damages you deserve. Call our offices to schedule an appointment, so we can discuss your case more in depth today.