Defraudation (Betrug in German) is a term referring to a deliberate act of deceit, misrepresentation, or manipulation undertaken with the intention to deceive investors, causing them financial harm.

In the context of capital markets, defraudation is a serious offense that undermines the integrity and trust in the financial system. Given the complexity of the ever-evolving financial landscape, investors are exposed to various forms and schemes of defraudation. These can range from insider trading and market manipulation to Ponzi schemes and fraudulent investment advice. Understanding defraudation is crucial for investors, as it enables them to identify potential risks and protect themselves against financial losses. Insider trading (Insiderhandel), a common form of defraudation, occurs when individuals with non-public information trade securities, taking advantage of their privileged insights. Such actions undermine the fairness of the market and can distort price movements. It is important to note that insider trading is illegal and subject to severe penalties under the German Securities Trading Act (Wertpapierhandelsgesetz). Another form of defraudation is market manipulation (Kursmanipulation), where false or misleading information is disseminated to influence stock prices. This can be achieved through spreading rumors, conducting wash trades, or engaging in stock price rigging (Aktienkursmanipulation). Market manipulation distorts the supply and demand dynamics and can lead to artificial price movements detrimental to investors' interests. One infamous example of defraudation is the Ponzi scheme (Schneeballsystem). Named after Charles Ponzi, this fraudulent investment operation relies on the continuous influx of new investors' funds to pay promised returns to existing investors. This unsustainable model eventually collapses, leaving many investors with substantial financial losses. German law considers Ponzi schemes as criminal acts and subject to prosecution under the Penal Code (Strafgesetzbuch). Furthermore, defraudation can occur through the provision of fraudulent investment advice (Betrügerische Anlageberatung). This involves dishonest practices by individuals or entities offering financial recommendations that are intentionally misleading or omit crucial information. Victims may be enticed by false promises of high returns or lured into investing in unsuitable products. It is crucial for investors to conduct thorough due diligence and seek advice from reputable professionals to avoid falling victim to such fraudulent practices. In conclusion, defraudation encompasses various fraudulent activities aimed at deceiving investors in capital markets. By becoming familiar with different forms of defraudation, investors can better protect themselves from financial harm. Awareness, due diligence, and adherence to the regulatory framework are essential in maintaining the integrity and stability of the capital markets. At Eulerpool.com, we strive to provide investors with comprehensive and informative resources to enhance their understanding of the financial landscape. Our glossary serves as a valuable tool, enabling investors to familiarize themselves with the technical terminology associated with capital markets, including terms related to defraudation. By staying informed, investors can make informed investment decisions while mitigating potential risks. Stay tuned to Eulerpool.com to explore our expansive glossary and stay up-to-date with the latest developments in the world of finance.