Fordham Law-SEC Conference Highlights Dangers of Financial Fraud


The New York Regional Office of the Securities and Exchange Commission (SEC) and Fordham Law School held a conference on November 1, 2019, that focused on fraudulent and manipulative schemes that target victims based on race, ethnicity, religion, gender, age, and other associations. Paul Radvany, director of Fordham Law’s Securities Litigation and Arbitration Clinic, helped coordinate the conference. Panels featured fraud victims, who shared their stories and experiences, and officials from federal and New Jersey agencies charged with enforcing anti-fraud laws. Participants from the SEC, Department of Justice (DOJ), Federal Bureau of Investigation (FBI), Financial Industry Regulatory Authority (FINRA), North American Securities Administrators Association, and New Jersey Bureau of Securities discussed effective strategies for detecting, preventing, and combating community-based financial fraud. 

“Frauds that target victims based on the associations to which they belong can be difficult to investigate, as victims are often reluctant to report wrongdoing by fellow community members or friends,” said Marc P. Berger, director of the SEC New York Regional Office. “These types of frauds—which exploit bonds of trust and friendship—are particularly devastating and can quickly lead to financial ruin.”

One victim told her emotional story about how trust had been built with a fraudulent broker because, like her, the broker was also an immigrant and was of the same nationality.

The Wizard of Lies

Scott Cohn, keynote speaker and special correspondent/producer of CNBC’s “American Greed,” provided real-life examples of affinity frauds that have been featured in the series.

One example Cohen described was the largest Ponzi scheme in history, masterminded by investment advisor Bernie Madoff in New York and Florida. Madoff, who was seen as a trusted investment advisor in the Jewish community, doctored $45 billion in fake profits that he claimed on account statements. He was convicted of wiping out $19 billion that investors, charities, and celebrities had entrusted to him since the 1970s and was sentenced to prison for 150 years. Cohen covered Madoff’s sentencing and court proceedings in 2009 and briefly met Madoff in a North Carolina prison in 2013. Though known as “The Wizard of Lies”—in part due to the 2017 HBO biopic of the same name—Cohen found Madoff to be “unbelievably ordinary.”

“I’m sure that when he was in his tailored suits and fancy watches, as opposed to his prison khakis, he might have seemed a little bit slicker. But he was just a very basic guy,” Cohen said, recollecting his visit. “He sucked in some of the most sophisticated people on Wall Street and then sucked in other investors [who]didn’t ask basic questions.”

After the fallout from that case, the SEC revised its standards of conduct for brokers and dealers. “Madoff should not have happened,” keynote speaker and SEC Chairman Jay Clayton said.

To help investors better identify legitimate investment experts, the SEC updated its website ( with direct informational access to SEC-registered investment advisors, their disciplinary histories, and which advisors are subject to supervision and inspection.

Tracey McNeil ’99

“There is a real person [at the other end of the website]who really cares about your issue or question, and we’re going to try to help you out,” said SEC Ombudsman Tracey McNeil ’99 during a later panel discussion.

Many Fordham Law students were in attendance, including Sijin Choi ’20, who asked Clayton how much the individual stories of fraud victims—like the ones that shared earlier that day—shape the agency’s rulemaking approach under his authority as chairman. Clayton responded that their personal experiences play a tremendous role.

SEC Chairman Jay Clayton and SEC New York Regional Office Director Marc P. Berger

“It’s not ‘what do we do?’ after it happens, but how do we set up our rules so that it doesn’t happen in the first place?” Clayton explained. “It’s [about]how can we set up our rules, so that when we go and inspect, we have a greater chance of catching [a fraudster]who has that veneer of respectability, but actually doesn’t. What requirements can be put into place for them, so that we can go check their internal policies and procedures against what’s actually happening? Do they actually have the assets that they say they do and how can we most effectively check that out?”

Vulnerable Market Participants

Radvany moderated a panel titled “Lessons Learned: Avoiding Fraud,” which highlighted agencies’ statistics on confronting the fraud and red flags to consider when making potential investments. 

During the panel, Gerri Walsh, senior vice president of Investor Education at FINRA, suggested there are three types of people who are typically exposed to affinity scams: those who engage with the fraudster by responding to a fraudulent investment offer, those who consider the opportunity but don’t invest, and those who invest after engagement. Walsh’s office, which partnered with the Better Business Bureau and the Stanford Center on Longevity to conduct a study, found that 53 percent of the 1,400 respondents had engaged with a scammer. Moreover, she said a quarter of those in the sample lost money in the investment.

In June 2019, the SEC announced two new measures—The Teachers’ Initiative and the Military Service Members’ Initiativethat focus additional enforcement and investor education resources on behalf of teachers, veterans, and active duty military personnel stationed domestically and abroad. “They’re generally in a position where paying attention to their investments is not easy,” Clayton said. “In each of those cases, somebody needs to be paying attention for them.”

Geoffrey Berman, a U.S. attorney in the Southern District of New York, also elaborated on underreported elder fraud. He said that older adults are another susceptible group, noting that social isolation and cognitive impairment are the two biggest risk factors to becoming an elder victim.

Two years ago, he noted, the Elder Abuse Prevention and Prosecution Act was enacted to address the serious problem with elder abuse in the country. The act requires comprehensive training in the area on elder justice for FBI agents. According to Berman, the FBI is “deeply committed to addressing the problems with elder abuse,” as are other state, federal, and local law enforcement groups. The DOJ’s targeted sweeps—in the last two years—have resulted in criminal and civil actions against more than 500 fraudsters who stole $4.5 billion from at least three million people.

Swindles that are commonly targeted toward the elderly include online dating scams (which rank highest, according to Berman), grandparent scams, tech support scams, mortgage scams, foreign investment scams, and IRS scams. He also noted that family members, neighbors, caregivers, and trusted advisors (e.g. bankers, lawyers, accountants, brokers, and tax preparers) could sometimes perpetrate those scams as a means to take advantage of the elderly.

“Victims sometimes don’t realize that they have been victimized. Sometimes they realize they have been defrauded but they are too embarrassed, ashamed, or even afraid to do anything about it,” Berman added. “And, sometimes victims simply don’t know where to turn.”


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