Why Professional Athletes are Common Victims of Investment Fraud

shutterstock_140321293Certain groups have been particularly vulnerable to advisors who engage in investment fraud. Among those groups well known are senior citizens who may have diminished capacity. Another group that serves as a common target are affinity frauds. In an affinity fraud the scammer preys upon members of a group or community such as members of certain religions or ethnic communities.

However, lessor known common victims of investment fraud schemes are professional athletes. Athletes are often preyed upon by bad advisors because they possess attributes that tend to allow the advisor to take advantage of their client. Athletes tend to be unsophisticated in the area of securities and investing often never having previous investment experience prior to going pro. In addition, athletes have busy schedules and demands on their time that do not allow the athlete to closely monitor or investigate each recommendation being made to them. Accordingly, athletes tend to place their trust in their professional advisor that they know what they are doing. Finally, athletes represent large, multi-million dollar opportunities to fraudsters.

In a recent OnWallStreet article, the unfortunate tales of several athletes were told. Among those athletes whose story were mentioned was Doug Mirabelli who recently won his arbitration dispute with Merrill Lynch where the firm was ordered to pay more than $1.2 million. The award came after Mirabelli and his wife claimed that their income portfolio, comprised of equities pledged against Merrill Lynch-owned mortgages, suffered losses that caused a liquidation. Their financial advisor Phil Scott was accused of providing “inappropriate investment advice” for securities including investments in Alliance Resource Partners, Apollo Investment Corp. and Copano Energy LLC.

In another FINRA arbitration case, a panel ordered Morgan Keegan (now Raymond James) to pay at least $1.59 million to former Los Angeles Lakers basketball star Horace Grant. The award comes from Grant’s alleged losses sustained from the Morgan Keegan Bond Funds that were heavily invested in the lowest tranches of mortgage-backed securities. Grant claimed that Morgan Keegan failed to disclose full risks involved with such investments.

In a recent regulatory action, FINRA filed a cease-and-desist order against Success Trade Securities and its CEO Fuad Ahmed. According to FINRA, Ahmed and other brokers at the firm sold more than $18 million in Success Trade promissory notes to 58 investors including many NFL and NBA players. FINRA found that Success Trade misrepresented or omitting material facts in that the firm claimed it was raising $5 million through the sale of promissory notes even though that number was exceeded by more than 300 percent.

Finally, NFL wide receiver Terrell Owens was a victim of advisor Jeff Rubin and his firm Pro Sports Financial who was accused of mismanaging his accounts, forging signatures, and making illegitimate transfers to other accounts. It was alleged Rubin and others introduced him to illegal and highly risky investments including a failed casino project in Alabama. Thereafter, FINRA barred Rubin and his firm from the securities industry for making unsuitable recommendations in high risk investments.

Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors in cases where their broker has acted inappropriately. Our consultations are free of charge and the firm is only compensated if you recover.

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