Once Bitten, Twice Shy – Asset Recovery Firms

~ By Gerald Rome, Colorado Securities Commissioner ~

Someone asked recently, what’s one scam affecting seniors that I’ve seen increase in popularity. I thought about affinity fraud and about free lunch seminars – these are indeed common. However, something many people have yet to hear about are so-called “asset recovery firms.” These are potential scams that come after the initial fraud has occurred. If you’ve recently been victimized by investment fraud, unfortunately you aren’t out of the woods yet.

Gerald Rome, Securities Commissioner

Asset recovery firms typically target investors who have lost thousands of dollars – perhaps their entire life’s savings – to fraudulent investment schemes, and are looking for someone who can help them sort through the aftermath. They are legal, but they should be approached with a great degree of caution, particularly if they’re the ones reaching out to you. They promise to help victims recover their money or to bring the perpetrator to justice. That sounds wonderful, but first, they require a fee.

These companies give investors false hope that they will recover lost funds, but in reality, the investment scheme is often so old that the company that perpetrated the fraud is either defunct or bankrupt, and recovery is very unlikely. When it comes to the asset-recovery scenario, it pays to remember the old adage: “once bitten, twice shy.”

Not too long ago, one of these companies took a sizeable upfront fee from an elderly investor in exchange for filing a complaint with state and federal regulators in an attempt to recover losses on an oil and gas investment that occurred eight years prior. Little did the investor know, but the con artist was already serving time in prison for fraud and had been for several years. It was also discovered that the company named the wrong person in the complaint; thereby taking a fee to file an erroneous, ultimately pointless claim.

These firms typically approach fraud victims through an unsolicited telephone call or email promising to recoup lost investment funds for an upfront fee. Once hired, the firm may send demand letters to the con artist, then file a standard complaint with state and federal regulators on behalf of the defrauded investor.

I’ve seen far too many cases where the company is out of business, the con man has spent all the funds on his own personal enjoyment, and despite being caught, there’s nothing left of the money for victims. As unfair as that is, by hiring one of these companies the investor risks becoming victimized for a second time.

If you ever find yourself in a position where you are being approached by one of these firms, before you do anything consider the following about the business: its fees; how its investigation will be conducted; what legal services it provides; how it coordinates with securities regulators; and its discussion of recovery.

If you consider all these aspects and something doesn’t feel right, call the Division of Securities. We can let you know if regulatory action has already occurred, if the company operating the investment fraud is still up and running, and if appropriate, we can help you file your own complaint. Our number is (303) 894-2878, or you can visit our website at www.dora.state.co/dos.