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What is Fraud Litigation?

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  • Written By: Charity Delich
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 November 2016
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Fraud litigation is a term used to describe a civil lawsuit that involves one party suing another party for engaging in fraudulent conduct. In this context, fraud generally means that, by intentionally misrepresenting the truth, one party induced another party to give up a legal right or to surrender something of value. A fraud litigation case is usually tried by a litigation attorney who specializes in this area.

The party bringing a fraud litigation claim is usually known as the plaintiff, and the party being sued is generally referred to as the defendant. Typically, the plaintiff has the burden of proving that the defendant engaged in fraudulent conduct. The plaintiff must prove several elements in order win the suit. In a typical civil fraud litigation case, these elements must be proved by a preponderance of the evidence or by clear and convincing evidence. The precise elements can vary depending on the type of fraud litigation, and different jurisdictions may require the plaintiff to prove slightly different elements.

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As a general rule, the plaintiffs must first demonstrate that a defendant made a material representation of fact. Secondly, they must prove that the defendant knew the representation was false. Thirdly, the plaintiffs must establish that the defendant intended for the plaintiffs to rely on the false representation. As part of the fourth element, they must establish that they reasonably believed the defendant and relied on the defendant’s misrepresentation. Finally, it must be shown that as a result of the defendants’ misrepresentation, they were harmed.

Situations involving business fraud often end up being litigated. For example, a swindler may acquire a substantial amount of merchandise on credit but intentionally avoid ever paying for it. A swindler may also defraud a business by paying for goods using phony checks. By the time the bank discovers the check is fake, the swindler is usually long-gone. Some swindlers use false references in order to obtain bank loans that they do not intend to repay.

Securities or investment fraud is another common type of fraud litigation case. Generally, securities fraud involves a stockbroker or an investment advisor enticing an investor to buy or sell securities on the basis of false information. In these cases, investors typically do not know that the information is false. Rather, they rely on the advice of the advisor to their detriment and end up realizing financial losses.

Insider trading, falsifying a company’s financial statement, and embezzlement are other examples of investment fraud. Investment fraud litigation cases are usually complex and often require the services of a business lawyer with expertise in securities and business law. In recent years, many countries have established laws that promote investor protection by levying harsh criminal and civil penalties on businesses and individuals who violate securities laws.

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