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Promissory Note Fraud

A promissory note is a form of debt that companies can issue to raise funds. In most situations, investors agree to loan money to the company for a predetermined amount of time. In exchange, the company agrees to pay the investor a fixed return by a certain date. Although investing in promissory notes can be a legitimate business opportunity, many people are convinced to sell promissory notes that were not issued by legitimate companies and are subsequently accused of committing fraud even when they were not aware that their actions were unlawful. These offenses are heavily prosecuted by both the Securities and Exchange Commission (SEC) and state securities regulators who have joined forces to prevent the fraudulent sale of promissory notes, so if you were recently accused of fraudulent activity, it is critical to contact an experienced white collar crime attorney as soon as possible.

Promissory Notes Defined

Promissory notes are usually used in connection with one of the following types of transactions:

  • Mortgages and loans;
  • Capital-raising endeavors by companies;
  • Real estate transactions; and
  • Banking transactions.

Although many promissory notes are legitimate and allow companies to increase capital and obtain loans, others are forged or otherwise fraudulent. Unfortunately, investors can be tricked into selling promissory notes by promoters who make deceptive statements, including that:

  • Investors will receive high returns;
  • Returns are essentially guaranteed; and
  • The notes are backed by collateral.

Penalties

Sellers are often not told that the notes being sold are actually securities, which must be registered with the SEC. As a result, the parties involved can be charged with violating the Securities Exchange Act, which prohibits anyone from directly or indirectly:

  • Employing any device, scheme, or artifice to defraud;
  • Making any untrue statement of a material fact or to fail to state a material fact necessary in order to make the statements made not misleading; or
  • Engaging in any act, practice, or course of business, which operates as a fraud in connection with the purchase or sale of a security.

Furthermore, those who use the mail or wire services to complete a transaction involving a fraudulent promissory note may also face charges of mail and wire fraud, both of which are punishable by up to 30 years in prison. Because there is so much at stake in these types of cases, it is especially important for those who are being investigated for fraud to contact an experienced attorney who can help them formulate a defense.

Call an Experienced White Collar Crime Attorney

At the office of Jeffrey S. Weiner, P.A., Criminal Defense Attorneys, we understand that being investigated for committing a fraud-related offense can be stressful and frightening. For this reason, we dedicate ourselves to helping relieve our clients of some of their burdens by aggressively representing their interests, whether in the courtroom or during settlement proceedings. If you are a resident of south Florida and have been accused of fraud, please call us at (305) 670-9919 or complete one of our standard contact forms. A member of our legal team can also be reached via live chat and can help you set up a free one-on-one consultation with a dedicated and skilled white collar crime attorney who can evaluate your case.

Resources:

gpo.gov/fdsys/pkg/CFR-2014-title17-vol4/xml/CFR-2014-title17-vol4-sec240-10b-5.xml

investor.gov/protect-your-investments/fraud/types-fraud/promissory-notes

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